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DRAFT RED HERRING PROSPECTUS

Dated October 12, 2010


Please read section 60B of the Companies Act, 1956, as amended
100% Book Building Issue
This Draft Red Herring Prospectus shall be updated at the time of filing with the RoC

THE SHIPPING CORPORATION OF INDIA LIMITED The

Our Company was incorporated as Eastern Shipping Corporation Limited on March 24, 1950 under the Companies Act, 1913 in Mumbai. With effect from October 2, 1961, Western Shipping
Corporation Limited was amalgamated with our Company under the Shipping Corporations Amalgamation Order, 1961, issued by the Government of India. The name of our Company was
changed from Eastern Shipping Corporation Limited to The Shipping Corporation of India Limited on October 21, 1961. Subsequently, for the purpose of listing in 1992, our Company was
changed from a private company to a public company and received a fresh certificate of incorporation on February 18, 1993. For details of changes in the name and registered office of our
Company, see “History and Certain Corporate Matters” beginning on page 117.
Registered Office: Shipping House, 245, Madame Cama Road, Mumbai 400 021
Company Secretary and Compliance Officer: Dipankar Haldar; Tel.: (91 22) 2202 6666; Fax: (91 22) 2202 6906
Website: www.shipindia.com; E-mail: cs@sci.co.in
PROMOTER: PRESIDENT OF INDIA, ACTING THROUGH THE MINISTRY OF SHIPPING, GOVERNMENT OF INDIA
FURTHER PUBLIC ISSUE OF 84,690,730 EQUITY SHARES OF Rs. 10 EACH (“EQUITY SHARES”) FOR CASH AT A PRICE OF Rs. [•] PER EQUITY SHARE OF THE SHIPPING
CORPORATION OF INDIA LIMITED (THE “COMPANY”) AGGREGATING TO Rs. [●] (HEREINAFTER REFERRED TO AS THE “ISSUE”). THE ISSUE COMPRISES OF A FRESH
ISSUE OF 42,345,365 EQUITY SHARES BY OUR COMPANY (THE “FRESH ISSUE”) AND AN OFFER FOR SALE OF 42,345,365 EQUITY SHARES BY THE PRESIDENT OF INDIA,
ACTING THROUGH THE MINISTRY OF SHIPPING, GOVERNMENT OF INDIA (THE “SELLING SHAREHOLDER”). THE ISSUE COMPRISES A NET ISSUE TO THE PUBLIC OF
84,267,276 EQUITY SHARES (“THE NET ISSUE”) AND A RESERVATION OF UP TO 423,454 EQUITY SHARES FOR SUBSCRIPTION BY ELIGIBLE EMPLOYEES (AS DEFINED
HEREIN) (“THE EMPLOYEE RESERVATION PORTION”). THE ISSUE WOULD CONSTITUTE 18.18% OF THE POST ISSUE PAID-UP EQUITY CAPITAL OF OUR COMPANY AND
THE NET ISSUE WOULD CONSTITUTE 18.09% OF THE POST ISSUE PAID-UP EQUITY CAPITAL OF OUR COMPANY.
THE PRICE BAND AND THE MINIMUM BID LOT WILL BE DECIDED BY OUR COMPANY AND THE SELLING SHAREHOLDER IN CONSULTATION WITH THE BOOK RUNNING
LEAD MANAGERS AND ADVERTISED IN [●] EDITION OF [●], [●] EDITION OF [●] AND [●] EDITION OF [●] AT LEAST ONE WORKING DAY PRIOR TO THE BID OPENING DATE.*
*Discount of 5% to the Issue Price being Rs. [●] determined pursuant to completion of the Book Building Process has been offered to Eligible Employees (the “Employee Discount”) and to Retail Individual Bidders (the
“Retail Discount”)
THE FACE VALUE OF THE EQUITY SHARE IS Rs. 10 EACH
In case of revision in the Price Band, the Bidding Period will be extended for at least three additional working days after the revision of the Price Band subject to the Bidding
Period not exceeding 10 working days. Any revision in the Price Band and the revised Bidding Period, if applicable, will be widely disseminated by notification to the Bombay
Stock Exchange Limited (the “BSE”) and the National Stock Exchange of India Limited (the “NSE”), by issuing a press release, and also by indicating the change on the websites
of the Book Running Lead Managers (“BRLMs”), at the terminals of the Syndicate Members and by intimation to Self Certified Syndicate Banks (“SCSBs”).
This Issue is being made through the 100% Book Building Process wherein up to 50% of the Net Issue will be allocated on a proportionate basis to Qualified Institutional Buyers
(“QIBs” and such portion the “QIB Portion”). The Company and the Selling Shareholders may, in consultation with the Book Running Lead Managers, allocate up to 30% of the
QIB Portion to Anchor Investors on a discretionary basis (“Anchor Investor Portion”), out of which at least one-third will be available for allocation to domestic mutual funds
only. For details, see “Issue Procedure” beginning on page 254. Further, 5% of the QIB Portion (excluding Anchor Investor Portion) shall be available for allocation on a
proportionate basis to Mutual Funds only. The remainder shall be available for allocation on a proportionate basis to QIBs and Mutual Funds, subject to valid Bids being received
from them at or above the Issue Price. In addition, not less than 15% of the Net Issue will be available for allocation on a proportionate basis to Non-Institutional Bidders and not
less than 35% of the Net Issue will be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Issue
Price. Further, 423,454 Equity Shares shall be available for allocation on a proportionate basis to the Eligible Employees, subject to valid Bids being received from them at or
above the Issue Price. Any Bidder other than Anchor Investors may participate in this Issue through the ASBA process by providing the details of bank accounts in which the
corresponding Bid Amounts will be blocked by the SCSBs. For details, see “Issue Procedure” beginning on page 254.
GENERAL RISKS
Investments in equity and equity-related securities involve a degree of risk and investors should not invest any funds in this Issue unless they can afford to take the risk of losing
their investment. Investors are advised to read the risk factors carefully before taking an investment decision in this Issue. For taking an investment decision, investors must rely
on their own examination of our Company and the Issue including the risks involved. The Equity Shares offered in the Issue have not been recommended or approved by the
Securities and Exchange Board of India (“SEBI”), nor does SEBI guarantee the accuracy or adequacy of this Draft Red Herring Prospectus. Specific attention of the investors is
invited to the “Risk Factors” beginning on page x.
ISSUER’S AND SELLING SHAREHOLDER’S ABSOLUTE RESPONSIBILITY
Our Company, having made all reasonable inquiries, accepts responsibility for and confirms that this Draft Red Herring Prospectus contains all information with regard to our
Company and the Issue, which is material in the context of the Issue, that the information contained in this Draft Red Herring Prospectus is true and correct in all material aspects
and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which make this
Draft Red Herring Prospectus as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect.
The Selling Shareholder accepts responsibility for and confirms that this Draft Red Herring Prospectus contains all information about them as a Selling Shareholder which is
material in the context of the Offer for Sale.
LISTING
The Equity Shares offered pursuant to this Draft Red Herring Prospectus are proposed to be listed on the BSE, the NSE, the CSE, the DSE and the MSE. We have received the in-
principle approvals of BSE and NSE for the listing of the Equity Shares pursuant to letters dated [●] and [●], respectively. For the purposes of this Issue, the Designated Stock
Exchange is the [●].
BOOK RUNNING LEAD MANAGERS REGISTRAR TO THE ISSUE

SBI CAPITAL MARKETS LIMITED ICICI SECURITIES LIMITED IDFC CAPITAL LIMITED KARVY COMPUTERSHARE
202, Maker Tower E ICICI Centre, H.T. Parekh Marg Naman Chambers, C-32 PRIVATE LIMITED
Cuffe Parade Churchgate G-Block, Bandra- Kurla Complex Plot no. 17 to 24, Vithalrao Nagar
Mumbai 400 005 Mumbai 400 020 Bandra (East), Mumbai 400 051 Madhapur
Tel: (91 22) 2217 8300 Tel: (91 22) 2288 2460 Tel: (91 22) 6622 2600 Hyderabad 500 081
Fax: (91 22) 2218 8332 Fax: (91 22) 2282 6580 Fax: (91 22) 6622 2501 Tel: (91 40) 4465 5000
E-mail: sci.fpo@sbicaps.com E-mail: sci.fpo@icicisecurities.com E-mail: sci.fpo@idfc.com Fax: (91 40) 2343 1551
Investor Grievance E-mail: Investor Grievance E-mail: Investor Grievance Email: Email: sci.fpo@karvy.com
investor.relations@sbicaps.com customercare@icicisecurities.com complaints@idfc.com Website: http:\\karisma.karvy.com
Website: www.sbicaps.com Website: www.icicisecurities.com Website: www.idfccapital.com Contact Person: M. Murali Krishna
Contact Person: Rochelle Dsouza/Anshika Contact Person: Rajiv Poddar Contact Person: Hiren Raipancholia SEBI Registration No.:
Malaviya SEBI Registration No.: INM000011179 SEBI Registration No.: INM000011336 INR000000221
SEBI Registration No.: INM000003531
BID PROGRAMME
* BID/ISSUE CLOSES ON
BID OPENS ON: [●], 2010
FOR QIB BIDDERS FOR NON-INSTITUTIONAL AND RETAIL BIDDERS
[●], 2010 [●], 2010
* Anchor Investors, if any, shall submit their Bid on the Anchor Investor Bidding Date, which is one working day prior to the Bid Opening Date.
TABLE OF CONTENTS

SECTION I – GENERAL ....................................................................................................................................... I 


DEFINITIONS AND ABBREVIATIONS .............................................................................................................I 
PRESENTATION OF FINANCIAL, INDUSTRY AND MARKET DATA ................................................... VIII 
FORWARD-LOOKING STATEMENTS ........................................................................................................... IX 
SECTION II - RISK FACTORS ........................................................................................................................... X 
SECTION III - INTRODUCTION ......................................................................................................................37 
SUMMARY OF INDUSTRY ..............................................................................................................................37 
SUMMARY OF OUR BUSINESS ......................................................................................................................40 
THE ISSUE ..........................................................................................................................................................44 
SELECTED FINANCIAL INFORMATION ......................................................................................................45 
GENERAL INFORMATION ..............................................................................................................................50 
CAPITAL STRUCTURE ....................................................................................................................................58 
OBJECTS OF THE ISSUE ..................................................................................................................................67 
BASIS FOR ISSUE PRICE..................................................................................................................................72 
STATEMENT OF TAX BENEFITS ...................................................................................................................75 
SECTION IV – ABOUT OUR COMPANY........................................................................................................80 
INDUSTRY OVERVIEW ...................................................................................................................................80 
OUR BUSINESS..................................................................................................................................................94 
REGULATIONS AND POLICIES IN INDIA ..................................................................................................114 
HISTORY AND CERTAIN CORPORATE MATTERS ..................................................................................117 
MANAGEMENT ...............................................................................................................................................131 
OUR PROMOTER.............................................................................................................................................154 
DIVIDEND POLICY .........................................................................................................................................155 
SECTION V - FINANCIAL INFORMATION ................................................................................................156 
FINANCIAL STATEMENTS ...........................................................................................................................156 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS ...................................................................................................................................................198 
SUMMARY OF PRINCIPAL DIFFERENCES BETWEEN IFRS AND INDIAN GAAP .............................217 
FINANCIAL INDEBTEDNESS .......................................................................................................................225 
STOCK MARKET DATA FOR EQUITY SHARES OF OUR COMPANY ...................................................230 
SECTION VI - LEGAL AND OTHER INFORMATION ..............................................................................232 
OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS ......................................................232 
GOVERNMENT AND OTHER APPROVALS ...............................................................................................235 
OTHER REGULATORY AND STATUTORY DISCLOSURES....................................................................238 
SECTION VII - ISSUE INFORMATION ........................................................................................................247 
TERMS OF THE ISSUE ....................................................................................................................................247 
ISSUE STRUCTURE ........................................................................................................................................250 
ISSUE PROCEDURE ........................................................................................................................................254 
RESTRICTIONS ON FOREIGN OWNERSHIP OF INDIAN SECURITIES .................................................283 
SECTION VIII - MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION ..................................284 
SECTION IX - OTHER INFORMATION .......................................................................................................296 
MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION .........................................................296 
DECLARATION ...............................................................................................................................................298 

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SECTION I – GENERAL
DEFINITIONS AND ABBREVIATIONS

Unless the context otherwise indicates or implies, the following terms have the following meanings in this
Draft Red Herring Prospectus, and references to any statute or regulations or policies shall include any
amendments or re-enactments thereto, from time to time.

Company Related Terms

Term Description
“SCI”, “our Company”, “the The Shipping Corporation of India Limited, a public limited company and
Corporation” and “the Issuer” Government company incorporated under the Companies Act with its registered
office at Shipping House, 245, Madame Cama Road, Mumbai 400 021
AoA/Articles of Association The Articles of Association of our Company, as amended
The joint statutory auditors of our Company, being P.S.D. & Associates, Chartered
Auditors Accountants and Sarda & Pareek, Chartered Accountants appointed for a period of
five years starting Fiscal Year 2010 by Comptroller and Auditor General of India
Board of Directors/Board Board of Directors of our Company duly constituted or a committee thereof
Directors Directors on the Board of our Company
MoA/Memorandum of The Memorandum of Association of our Company, as amended
Association
Mitsui Mitsui OSK Lines Limited
MTI Maritime Training Institute
Nippon Nippon Yusen Kabushiki Kaisha
Promoter/Selling Shareholder The President of India, acting through the Ministry of Shipping, Government of India
Registered and Corporate The registered and corporate office of our Company located at Shipping House, 245,
Office Madame Cama Road, Mumbai 400 021
RoC Registrar of Companies, Maharashtra, Mumbai
SAIL Steel Authority of India Limited

Issue Related Terms

Term Description
Allotted/Allotment/Allot The allotment of Equity Shares pursuant to the Fresh Issue and the transfer of the
Equity Shares pursuant to the Offer for Sale to successful Bidders
Allottee A successful Bidder to whom Equity Shares are Allotted
Anchor Investor A Qualified Institutional Buyer, applying under the Anchor Investor Portion with a
minimum Bid of Rs. 100 million
Anchor Investor Allocation Notice or intimation of allocation of Equity Shares sent to the Anchor Investors who
Notice have been allocated Equity Shares
Anchor Investor Bidding Date The date which is one Working Day prior to the Bid Opening Date, on which Bids by
Anchor Investors shall be accepted and allocation to the Anchor Investors shall be
completed
Anchor Investor Issue Price The final price at which Equity Shares will be issued and Allotted in terms of the Red
Herring Prospectus and the Prospectus to the Anchor Investors, which will be a price
equal to or higher than the Issue Price
Anchor Investor Portion Up to 30% of the QIB Portion (i.e. 12,640,091 Equity Shares), which may be allocated
to Anchor Investors by our Company and the Selling Shareholder in consultation with
the BRLMs, on a discretionary basis in accordance with SEBI Regulations. One-third
of the Anchor Investor Portion shall be reserved for domestic Mutual Funds, subject to
valid Anchor Investor Bids being received from domestic Mutual Funds at or above
the price at which allocation will be made to Anchor Investors
Application Supported by The process by which an ASBA Bidder to make a Bid authorizing the SCSB to block
Blocked Amount/ASBA the Bid Amount in the specified bank account maintained with the SCSB

ASBA Account Account maintained by an ASBA Bidder with a SCSB which will be blocked by such
SCSB to the extent of the Bid Amount of the ASBA Bidder
ASBA Bid cum Application The application form, whether physical or electronic, used by an ASBA Bidder to
Form make a Bid through ASBA process, which will be considered as the application form
for Allotment for the purposes of the Red Herring Prospectus and the Prospectus
ASBA Bidder Any Bidder who intends to apply through ASBA other than the Anchor Investor
ASBA Revision Form The form used by the ASBA Bidders to modify the quantity of Equity Shares or the
Bid Amount in any of their ASBA Bid cum Application Forms or any previous ASBA
revision form(s)

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Term Description
Banker(s) to the Issue/Escrow The banks which are clearing members and registered with SEBI as Bankers to the
Collection Bank(s) Issue with whom the Escrow Account will be opened, in this case being [●]
Basis of Allotment The basis on which the Equity Shares will be Allotted, described in “Issue Procedure”
beginning on page 254
Bid An indication to make an offer during the Bidding Period by a Bidder (including an
ASBA Bidder), or on the Anchor Investor Bidding Date by an Anchor Investor,
pursuant to submission of a Bid cum Application Form or ASBA Bid cum Application
Form to subscribe to our Equity Shares at a price within the Price Band, including all
revisions and modifications thereto
Bid Amount The highest value of the optional Bids indicated in the Bid cum Application Form and
payable by a Bidder on submission of a Bid in the Issue and in the case of ASBA
Bidders, the amount mentioned in the ASBA Bid cum Application Form
Bid Closing Date Except in relation to the Anchor Investors, the date after which the Syndicate and the
SCSBs will not accept any Bids, which shall be notified in an English national
newspaper, Hindi national newspaper and a Marathi newspaper, each with wide
circulation
Bid Opening Date Except in relation to the Anchor Investors, the date on which the Syndicate and the
SCSBs shall start accepting Bids, which shall be notified in an English national
newspaper, a Hindi national newspaper and a Marathi newspaper, each with wide
circulation
Bid cum Application Form The form in terms of which the Bidder (which, unless expressly provided, includes the
ASBA Bid cum Application Form used by an ASBA Bidder, as applicable) shall make
an offer to subscribe for or purchase the Equity Shares and which shall be considered
as the application form for Allotment for the purposes of the Red Herring Prospectus
and the Prospectus
Bidder Any prospective investor (including an ASBA Bidder) who makes a Bid pursuant to
the terms of the Red Herring Prospectus and the Bid cum Application Form
Bidding Period The period between the Bid Opening Date and the Bid Closing Date, inclusive of both
days during which prospective Bidders (excluding Anchor Investors) can submit their
Bids, including any revisions thereof. Our Company may consider closing the book for
QIBs one day prior to the Bid/Issue Closing Date in accordance with the SEBI
Regulations
Book Building Process The book building process as provided in Schedule XI of the SEBI Regulations, in
terms of which this Issue is being made
Book Running Lead The book running lead managers to this Issue, in this case being, SBI Capital Markets
Managers/BRLMs Limited, IDFC Capital Limited and ICICI Securities Limited
Confirmation of Allotment The note or advice or intimation sent to the successful Bidder indicating the Equity
Note/CAN Shares which will be Allotted after approval of the Basis of Allotment by the
Designated Stock Exchange
Cap Price The higher end of the Price Band, above which the Issue Price and Anchor Investor
Issue Price will not be finalized and above which no Bids will be accepted
Controlling Branches of the Such branches of the SCSBs which coordinate Bids in the Issue by ASBA Bidders
SCSBs with the BRLMs, the Registrar to the Issue, BSE and the NSE, a list of which is
available on http://www.sebi.gov.in/pmd/scsb.pdf
Cut-off Price The Issue Price finalized by our Company and the Selling Shareholder, in consultation
with the BRLMs, which shall be any price within the Price Band. Only Retail
Individual Bidders and Eligible Employees, whose Bid Amount does not exceed Rs.
100,000 are entitled to Bid at the Cut-off Price. No other category of Bidders are
entitled to Bid at the Cut-off Price
Designated Branches Such branches of the SCSBs which shall collect the physical ASBA Bid cum
Application Form used by ASBA Bidders and a list of which is available on
http://www.sebi.gov.in/pmd/scsb.pdf
Designated Date The date on which funds are transferred by the Escrow Collection Banks from the
Escrow Account or the amounts blocked by the SCSBs are transferred from the ASBA
Accounts, as the case may be, to the Public Issue Account or the Refund Account, as
appropriate, after the Prospectus is filed with the RoC, following which the Board of
Directors shall Allot Equity Shares to successful Bidders in the Fresh Issue and the
Selling Shareholder shall give delivery instructions for transfer of the Equity Shares
constituting the Offer for Sale
Designated Stock Exchange [●]
Draft Red Herring This Draft Red Herring Prospectus filed with SEBI and issued in accordance with
Prospectus/DRHP Section 60B of the Companies Act, which does not contain complete particulars of the
price at which the Equity Shares are offered
Eligible Employees A permanent and full-time employee of our Company or a Director of our Company
(excluding any person not eligible under applicable laws, rules, regulations and

ii
Term Description
guidelines), as on the date of filing of the Red Herring Prospectus with the RoC, who
are Indian nationals and are based, working and present in India as on the date of
submission of the Bid cum Application Form/ASBA Form and who continue to be in
the employment of our Company until submission of the Bid cum Application
Form/ASBA Form.

An employee of our Company who is recruited against a regular vacancy but is on


probation as on the date of submission of the Bid cum Application Form/ ASBA Form
will also be deemed a ‘permanent employee’ of our Company.
Eligible NRI An Non Resident Indian in a jurisdiction outside India where it is not unlawful to make
an offer or invitation under the Issue and in relation to whom the Red Herring
Prospectus will constitute an invitation to subscribe for the Equity Shares
Employee Discount A discount of 5% to the Issue Price determined pursuant to the completion of the Book
Building Process given to the Eligible Employees
Employee Reservation Portion The portion of the Issue, being 423,454 Equity Shares, available for allocation to
Eligible Employees. This portion shall not exceed 5% of the post-Issue capital of our
Company
Equity Share(s) Equity Share(s) of our Company of face value of Rs. 10 each
Equity Shareholder A holder of the Equity Share(s)
Escrow Account(s) Account(s) opened with the Escrow Collection Bank(s) for the Issue and in whose
favour the Bidders (excluding ASBA Bidders) will issue cheques or drafts in respect of
the Bid Amount
Escrow Agreement Agreement to be entered into among our Company, the Selling Shareholder, the
Registrar, the BRLMs, the Syndicate Member(s) and the Escrow Collection Bank(s)
for collection of the Bid Amounts and remitting refunds, if any, of the amounts to the
Bidders (excluding ASBA Bidders) on the terms and conditions thereof
First Bidder The Bidder whose name appears first in the Bid cum Application Form or the Revision
Form or the ASBA Bid cum Application Form or the ASBA Revision Form
Floor Price The lower end of the Price Band and any revisions thereof below which the Issue Price
will not be finalized and below which no Bids will be accepted
Fresh Issue This issue of 42,345,365 Equity Shares aggregating to Rs. [●] million by our Company
Issue Collectively, the Fresh Issue and the Offer for Sale
Issue Agreement The agreement entered into amongst our Company, the Selling Shareholder and the
BRLMs pursuant to which certain arrangements are agreed to in relation to the Issue
Issue Price The final price at which Equity Shares will be issued and Allotted to the successful
Bidders in terms of the Red Herring Prospectus and the Prospectus. The Issue Price
will be decided by our Company and the Selling Shareholder, in consultation with the
BRLMs on the Pricing Date
Monitoring Agency [●]
Mutual Fund Portion 5% of the QIB Portion (excluding the Anchor Investor Portion) equal to a minimum of
1,474,677 Equity Shares available for allocation to Mutual Funds only, on a
proportionate basis
Net Issue Issue less the Employee Reservation Portion, consisting of 84,267,276 Equity Shares
to be Allotted in the Issue
Net Proceeds Proceeds of the Fresh Issue that are available to our Company, excluding the Issue
related expenses payable by the Company and the proceeds of the Offer for Sale
Non Institutional Bidders All Bidders, including sub-accounts of FIIs registered with SEBI, which are foreign
corporate or foreign individuals, that are not QIBs (including Anchor Investors) or
Retail Individual Bidders and who have Bid for Equity Shares for an amount more than
Rs. 100,000
Non Institutional Portion The portion of the Net Issue, being not less than 12,640,091 Equity Shares, available
for allocation to Non Institutional Bidders
Offer for Sale The offer for sale by the Selling Shareholder of 42,345,365 Equity Shares at the Issue
Price
Price Band Price Band with a minimum price of Rs. [●] (Floor Price) and the maximum price of
Rs. [●] (Cap Price) and includes revisions thereof. The Price Band and the minimum
Bid lot size for the Issue will be decided by our Company and the Selling Shareholder
in consultation with the BRLMs and advertised, at least one working day prior to the
Bid Opening Date, in [●] edition of English national daily [●], [●] edition of Hindi
national daily [●] and [●] edition of Marathi language newspaper [●]
Pricing Date The date on which our Company and the Selling Shareholder, in consultation with the
BRLMs will finalize the Issue Price
Prospectus The Prospectus to be filed with the RoC in terms of Section 60 of the Companies Act,
containing, among other things, the Issue Price that is determined at the end of the
Book Building Process, the size of the Issue and certain other information and

iii
Term Description
including any addenda or corrigenda thereof
Public Issue Account Account opened with the Bankers to the Issue to receive monies from the Escrow
Account(s) and the bank accounts of the ASBA Bidders, on the Designated Date
Qualified Institutional Buyers Public financial institutions as specified in Section 4A of the Companies Act, FIIs and
or QIBs sub-accounts registered with SEBI, other than a sub-account which is a foreign
corporate or foreign individual, scheduled commercial banks, mutual funds registered
with SEBI, multilateral and bilateral development financial institutions, venture capital
funds registered with SEBI, foreign venture capital investors registered with SEBI,
state industrial development corporations, insurance companies registered with the
Insurance Regulatory and Development Authority, provident funds (subject to
applicable law) with minimum corpus of Rs. 250 million and pension funds with
minimum corpus of Rs. 25 million, the National Investment Fund set up by resolution
F. No. 2/3/2005-DD-II dated November 23, 2005 of Government of India published in
the Gazette of India and insurance funds set up and managed by army, navy or air
force of the Union of India
QIB Portion The portion of the Net Issue being up to 42,133,638 Equity Shares to be Allotted to
QIBs on a proportionate basis, including the Anchor Investor Portion
Refund Account(s) Account(s) opened with Escrow Collection Bank(s) from which refunds of the whole
or part of the Bid Amount (excluding to the ASBA Bidders), if any, shall be made
Refund Bank(s) The bank(s) which is a/are clearing member(s) and registered with the SEBI as
Bankers to the Issue, at which the Refund Accounts will be opened, in this case being,
[●]
Registrar/ Registrar to the Registrar to the Issue, in this case being, Karvy Computershare Private Limited
Issue
Retail Discount A discount of 5% to the Issue Price determined pursuant to the completion of the Book
Building Process given to the Retain Individual Bidders
Retail Individual Bidder(s) Individual Bidders (including HUFs and NRIs) who have Bid for Equity Shares for an
aggregate amount less than or equal to Rs. 100,000 in all of the bidding options in the
Issue
Retail Portion The portion of the Net Issue being not less than 29,493,547 Equity Shares available for
allocation to Retail Individual Bidder(s)
Revision Form The form used by the Bidders, other than ASBA Bidders, to modify the quantity of
Equity Shares or the Bid Amount in any of their Bid cum Application Forms or any
previous Revision Form(s)
Red Herring Prospectus/RHP The Red Herring Prospectus which will be issued in accordance with Section 60B of
the Companies Act, which will not have complete particulars of the price at which the
Equity Shares shall be issued and which shall be filed with the RoC at least three days
before the Bid Opening Date and will become the Prospectus after filing with the RoC
after the Pricing Date
Self Certified Syndicate Bank/ The banks which are registered with SEBI under the SEBI (Bankers to an Issue)
SCSB Regulations, 1994 and offer services of ASBA, including blocking of bank account, a
list of which is available on http://www.sebi.gov.in/pmd/scsb.pdf
Stock Exchanges The BSE, the NSE, the CSE, the DSE and the MSE
Syndicate Collectively, the BRLMs and the Syndicate Member(s)
Syndicate Agreement Agreement to be entered among the Syndicate, our Company and the Selling
Shareholder in relation to the collection of Bids (excluding Bids from the ASBA
Bidders) in this Issue
Syndicate Member(s) [●]
TRS/ Transaction Registration The slip or document issued only on demand by the Syndicate or the SCSB to the
Slip Bidder as proof of registration of the Bid
Underwriters The BRLMs and the Syndicate Member(s)
Underwriting Agreement The Agreement between the Underwriters and our Company and the Selling
Shareholder to be entered into, on or after the Pricing Date
Working Day(s) Working days will be all days excluding Sundays and bank holidays except during the
Bidding Period, where a working day means all days on which banks in Mumbai are
open for business other than a Saturday, Sunday or a public holiday

Technical/Industry Related Terms

Term Description
AHTSV Anchor Handling, Towing Cum Supply Vessels
AHTS Anchor Handling Tug Supply
BIMCO The Baltic and International Maritime Council
Bhp Brake horsepower

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BPCL Bharat Petroleum Corporation Limited
Bpd Barrels per day
Cbm Cubic metre
COA Contracts of Affreightment
D.G. Shipping Directorate General of Shipping, Government of India
DP II Class 2 Dynamic Positioning
DSV Dive Support Vessels
DWT Dead Weight Tonnage
E&P Exploration and Production
ERP Enterprise Resource Planning
FiFi I Class 1 Fire Fighting System
FiFi II Class 2 Fire Fighting System
FSUI Forward Seamen’s Union of India
HPCL Hindustan Petroleum Corporation Limited
IAPP International Air Pollution Prevention Certificate
INDFEX-1 India Far East Express 1
INDFEX- 2 India Far East Express 2
IMED India Mediterranean
IRISIL Islamic Republic of Iran Shipping Lines
ISE India Sub- continental, Europe
ISM International Safety Management
ISPP International Sewage Pollution Prevention Certificate
MARPOL International Convention for the Prevention of Pollution from Ships
MDU Mobile Drilling Units
MMBtu 1,000 British Thermal Units
MPSSV Multi-Purpose Platform Supply and Support Vessels
MSV Multi-Purpose Support Vessels
MUI Maritime Union of India
NUSI National Union of Seafarers of India
OEE Office of Export Enforcement of the U.S. Department of Commerce
O&M Operations, Manning, Maintenance and Management
ONGC Oil and Natural Gas Corporation Limited
OPEC Organisation of Petroleum Exporting Countries
Psi Pounds per Square Inch
PSV Platform Supply Vessel
ROV Remotely Operated Vehicle
ROVSV Remotely Operated Vehicle Support Vessel
Sanctions Targets Entities and Individuals that are subject to U.S. Economic Sanctions Laws
SBM Single Buoy Moorings
SET-IT SCI Enterprises Transformation through Information Technology
SMC Safety Management Certificate
SPS Code Code of Safety for Special Purpose Ships
STCW Certificate and Watchkeeping Code
TBP Total Bollard Pull
TCS Tata Consultancy Services
TEU Twenty- Foot Equivalent Units
UNGC United Nations Global Compact
ULCC Ultra Large Crude Carrier
VLCC Very Large Crude Carrier

Conventional / General Terms

Term Description
CLRA Contract Labour (Regulation and Abolition) Act, 1970, as amended
Companies Act The Companies Act, 1956, as amended
Competition Act Competition Act, 2002, as amended
Competition Commission Competition Commission of India
Depositories NSDL and CDSL
Depositories Act Depositories Act, 1996, as amended
Department of Industrial Policy and Promotion of the Ministry of Commerce and
DIPP
Industry, Government of India
DP/ Depository Participant Depository participant as defined under the Depositories Act, 1996, as amended

v
Term Description
Foreign Exchange Management Act, 1999, as amended, read with rules and
FEMA
regulations thereunder
FII(s) Foreign Institutional Investors (as defined under FEMA (Transfer or Issue of Security
by a Person Resident outside India) Regulations, 2000), registered with SEBI under
applicable laws in India, as amended
Financial Year / Fiscal Period of 12 months ended March 31 of that particular year
FVCIs Foreign Venture Capital Investors (as defined under the SEBI (Foreign Venture Capital
Investors) Regulations, 2000), as amended, registered with SEBI
GAAP Generally Accepted Accounting Principles
Government Government of India
IT Act Income Tax Act, 1961, as amended
Indian GAAP Generally Accepted Accounting Principles in India
LIBOR London Interbank Offered Rate
Minimum Wages Act Minimum Wages Act, 1948, as amended
Mutual Fund(s) A mutual fund registered with SEBI under the SEBI (Mutual Funds) Regulations,
1996, as amended
OCB/Overseas Corporate Body A company, partnership, society or other corporate body owned directly or indirectly
to the extent of at least 60% by NRIs including overseas trusts, in which not less than
60% of beneficial interest is irrevocably held by NRIs directly or indirectly as defined
under Foreign Exchange Management (Transfer or Issue of Foreign Security by a
Person resident outside India) Regulations, 2000, as amended
RBI Reserve Bank of India
RBI Act Reserve Bank of India Act, 1934, as amended
SBAR State Bank Advance Rate
SCRA Securities Contracts (Regulation) Act, 1956, as amended
SCRR Securities Contracts (Regulation) Rules, 1957, as amended
SEBI Securities and Exchange Board of India constituted under the SEBI Act
SEBI Act Securities and Exchange Board of India Act, 1992, as amended
Securities and Exchange Board of India (Issue of Capital and Disclosure
SEBI Regulations
Requirements) Regulations, 2009, as amended
Takeover Code SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, as
amended

Abbreviations

Term Description
A/c Account
AGM Annual General Meeting
AS Accounting Standards issued by the ICAI
AY Assessment Year
BSE Bombay Stock Exchange Limited
CAGR Compounded Annual Growth Rate
CDSL Central Depository Services (India) Limited
CENVAT Central Value Added Tax
CSE The Calcutta Stock Exchange Association Limited
DIN Director Identification Number
DP ID Depository Participant’s Identity
DSE Delhi Stock Exchange Limited
EBITDA Earnings Before Interest, Tax, Depreciation and Amortization
EGM Extraordinary General Meeting
EPS Earnings Per Share i.e., profit after tax for a fiscal year divided by the outstanding
number of equity shares at the end of that fiscal year
FCNR Foreign Currency Non Resident
FDI Foreign Direct Investment
GDP Gross Domestic Product
Government Government of India
HUF Hindu Undivided Family
HSE Health, Safety and Environment
ICAI The Institute of Chartered Accountants of India
IFRS International Financial Reporting Standards
IMO International Maritime Organisation
IPO Initial Public Offering
ISF International Shipping Federation

vi
Term Description
LNG Liquefied Natural Gas
LPG Liquefied Petroleum Gas
MAT Minimum Alternative Tax under the I.T. Act
MSE Madras Stock Exchange Limited
NA Not Applicable
NAV Net Asset Value
NECS National Electronic Clearing Service
NEFT National Electronic Fund Transfer
NOC No Objection Certificate
NR Non-resident
NRE Account Non Resident External Account
Non Resident Indian as defined under FEMA and the Foreign Exchange Management
NRI Act (Transfer or Issue of Security by a Person Resident Outside India) Regulations,
2000, as amended
NRO Account Non Resident Ordinary Account
NSDL National Securities Depository Limited
NSE The National Stock Exchange of India Limited
OFAC U.S. Department of the Treasury’s Office of Foreign Assets Control
P/E Ratio Price Earnings Ratio
PAN Permanent Account Number allotted under the I.T. Act
PBDIT Profit before depreciation, interest and tax
PIO Persons of Indian Origin
RBI Reserve Bank of India
RONW Return on Net Worth
Rs. Indian Rupees
RTGS Real Time Gross Settlement
STT Securities Transaction Tax
UIN Unique Identification Number
U.S. / USA United States of America
USD/US$ United States Dollar
U.S. GAAP United States Generally Accepted Accounting Principles
w.e.f. With effect from

vii
PRESENTATION OF FINANCIAL, INDUSTRY AND MARKET DATA

Financial Data
Unless stated otherwise, the financial data in this Draft Red Herring Prospectus is derived from our financial
statements prepared in accordance with Indian GAAP and the Companies Act and restated in accordance with
the SEBI Regulations.
Our fiscal year commences on April 1 and ends on March 31 of the next year, so all references to a particular
fiscal year are to the 12 months period ended March 31 of that year. In this Draft Red Herring Prospectus, any
discrepancies in any table between the total and the sums of the amounts listed are due to rounding off.
There are significant differences between Indian GAAP, U.S. GAAP and IFRS. We urge you to consult your
own advisors regarding such differences and their impact on our financial data. Accordingly, the degree to
which the Indian GAAP financial statements included in this Draft Red Herring Prospectus will provide
meaningful information is entirely dependent on the reader’s level of familiarity with Indian GAAP. Any
reliance by persons not familiar with Indian accounting practices on the financial disclosures presented in this
Draft Red Herring Prospectus should accordingly be limited.
All references to “India” contained in this Draft Red Herring Prospectus are to the Republic of India, all
references to the “U.S.”, “USA”, or the “United States” are to the United States of America.
Industry and Market Data
Unless stated otherwise, the industry and market data used throughout this Draft Red Herring Prospectus has
been obtained from industry publications and government data. These publications generally state that the
information contained therein has been obtained from sources believed to be reliable but that their accuracy and
completeness are not guaranteed and their reliability cannot be assured. Accordingly, no investment decision
should be made on the basis of such information. Although we believe that the industry data used in this Draft
Red Herring Prospectus is reliable, it has not been independently verified. Data from these sources may also not
be comparable. The extent to which the industry and market data used in this Draft Red Herring Prospectus is
meaningful, would depend on the readers’ familiarity with and understanding of the methodologies used in
compiling such data.
This data has not been prepared or independently verified by us or the BRLMs or any of their respective
affiliates or advisors. Such data involves risks, uncertainties and numerous assumptions and is subject to change
based on various factors, including those discussed in “Risk Factors” beginning on page x. Accordingly,
investment decisions should not be based on such information.
In accordance with the SEBI Regulations, we have included in “Basis for the Issue Price” beginning on page 72
information relating to our peer group companies. Such information has been derived from publicly available
sources and our Company and the Selling Shareholder have not independently verified such information.
Currency and Units of Presentation
All references to “Rupees” or “Rs.” are to Indian Rupees, the official currency of the Republic of India. All
references to “U.S. Dollar” or “USD” or “US$” are to United States Dollar, the official currency of the United
States of America.
Exchange Rates
This Draft Red Herring Prospectus contains translations of certain U.S. Dollar and other currency amounts into
Indian Rupees that have been presented solely to comply with the requirements of item (VIII) sub-item (G) of
Part A of Schedule VIII of the SEBI Regulations. These convenience translations should not be construed as a
representation that those U.S. Dollar or other currency amounts could have been, or can be converted into Indian
Rupees, at any particular rate or at all.
The exchange rates of the respective foreign currencies as on June 30, 2010, March 31, 2010, March 31, 2009
and March 31, 2008 are provided below:
(Rs.)
Currency Exchange Rate as on Exchange Rate as on Exchange Rate as on Exchange Rate as on
June 30, 2010 March 31, 2010 March 31, 2009 March 31, 2008
1 US$ 46.6 45.14 50.95 39.97
Source: www.rbi.org.in

viii
FORWARD-LOOKING STATEMENTS

This Draft Red Herring Prospectus contains certain “forward-looking statements”. These forward looking
statements generally can be identified by words or phrases such as “aim”, “anticipate”, “believe”, “expect”,
“estimate”, “intend”, “objective”, “plan”, “project”, “will”, ”shall”, “will continue”, “will pursue” or other
words or phrases of similar import. Similarly, statements that describe our objectives, strategies, plans or goals
are also forward-looking statements. All forward looking statements are subject to risks, uncertainties and
assumptions about us that could cause actual results to differ materially from those contemplated by the relevant
forward-looking statement.

Important factors that could cause actual results to differ materially from our expectations include, but are not
limited to, the following:

• demand for our bulk carriers and tankers and demand for energy products;
• inability to negotiate profitable contracts for the employment of our vessels;
• decreased revenue due to the fluctuations in charter rates;
• renewing of our existing contracts of affreightment on commercially reasonable terms;
• failure to purchase or acquire new or second hand vessels meeting our requirements at prices;
• failure to maintain the size of our owned fleet or chartered fleet; and
• disruptions in our implementation plans to our new SCI Enterprise Transformation through Information
Technology project;
• regulatory changes pertaining to the industry in India or abroad having an impact on our business and
our ability to respond to them;
• our ability to successfully implement our strategy, growth and expansion;
• the monetary and fiscal policies of India, inflation, deflation, unanticipated turbulence in interest rates,
foreign exchange rates, equity prices and other rates or prices; and
• general economic and political conditions in India and globally and our ability to respond to them.

For further discussion of factors that could cause our actual results to differ, see “Risk Factors” and
“Management Discussion and Analysis of Financial Condition and Results of Operations” beginning on pages x
and 198 respectively. By their nature, certain market risk disclosures are only estimates and could be materially
different from what actually occurs in the future. As a result, actual future gains or losses could materially differ
from those that have been estimated. Neither our Company, the Selling Shareholder nor the BRLMs nor the
Syndicate Member(s) nor any of their respective affiliates have any obligation to update or otherwise revise any
statements reflecting circumstances arising after the date hereof or to reflect the occurrence of underlying
events, even if the underlying assumptions do not come to fruition. In accordance with the SEBI requirements,
our Company, the Selling Shareholder and the BRLMs will ensure that investors in India are informed of
material developments until such time as the grant of listing and trading permission by the Stock Exchanges.

ix
SECTION II - RISK FACTORS

An investment in our Equity Shares involves a degree of risk. You should carefully consider all the information
in this Draft Red Herring Prospectus, including our financial statements and the related notes and
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page
198 and the risks and uncertainties described below, before making an investment in the Equity Shares. If any
one or some combination of the following risks were to occur, our business, financial condition and results of
operations could suffer, and the price of the Equity Shares could decline and you may lose all or part of your
investment. Unless specified in the relevant risk factor below, we are not in a position to quantify the financial
implication of any of the risks mentioned below. Additional risks not presently known to us or that we currently
deem immaterial may also impair our business operations.

This Draft Red Herring Prospectus also contains forward-looking statements that involve risks and
uncertainties. The actual results of our operations could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including the risks we face as described below and
elsewhere in this Draft Red Herring Prospectus. You should also consider the warning regarding forward-
looking statements in “Forward-Looking Statements” beginning on page ix.

Any potential investor in, and purchaser of, the Equity Shares should pay particular attention to the fact that we
are governed, in India and other countries in which we operate, by a legal and regulatory environment which
may be different from that which prevails in the United States and other countries in some material respects. In
addition, the risks set out in this section may not be exhaustive and additional risks and uncertainties not
presently known to us, or which we currently deem to be immaterial, may arise or may become material in the
future. In making an investment decision, prospective investors must rely on their own examination of us on a
consolidated basis and the terms of the Issue including the merits and the risks involved.

Internal Risks (Risks Relating to Our Business)

1. Our results of operations have been impacted by a downturn in the international shipping markets.

Our revenue and net profit for Fiscal Year 2010 dropped by 14.3% and 59%, respectively, compared to
Fiscal Year 2009. According to UNCTAD, in the twelve months ended December 31, 2009, demand
for shipping services as well as the prices charged by international shipping companies dropped
significantly, as the world economy came under pressure and shipping markets underwent a correction,
including the Indian shipping market. (Sources: Review of Maritime Transport, 2009, UNCTAD
(UNCTAD/RMT/2009)). There is no assurance that we will be able to attain the revenue and gross
profits that we achieved in the past, and any material fluctuations or declines in such revenue and gross
profits may have an adverse effect on our financial condition and results of operations.

2. The demand for our bulk carriers and tankers is, to a large extent, dependent on the demand for
energy products. A decline in the demand for energy products could have an adverse effect on our
financial condition and results of operations.

Our bulk carrier and tanker division is the primary income source of our Company, accounting for
70.5%, 71.7%, 68.5% and 63% of our total income for Fiscal Years 2008, 2009 2010 and the six month
period ending June 30, 2010, respectively. The demand for our bulk carriers and tankers, to a large
extent, depends on the demand for energy products, including crude oil, gas and coal. Such demand is
subject to a variety of factors that are beyond our control, including:

• expectations about future prices and price volatility of energy products;


• the cost of exploration for, and production and transportation of, oil, gas and coal;
• worldwide demand for energy products;
• availability and rate of discovery of new oil and gas resources in offshore areas;
• changes in capital spending budgets by our customers;
• government policies and initiatives in awarding offshore exploration blocks;
• local and international political and economic conditions and policies, including developments in
international trade which affect cabotage and local laws;
• technological advances affecting energy production and consumption, including substitution by,
and availability of, alternative energy sources;
• weather conditions;

x
• environmental and other regulations affecting our customers and their other service providers;
• changes in seaborne and other transportation patterns;
• state of the financial markets; and
• the ability of oil, gas, coal and other energy product companies to generate or otherwise obtain
funds for exploration and production.

A decline in the demand for energy products, due to one or more of the above factors, would result in a
decrease in the demand for our bulk carrier and tanker services. This could, in turn, reduce the rates we
charge, and have an adverse effect on our financial condition and results of operations.

3. Our results of operations may be adversely affected by our inability to negotiate profitable contracts
for the employment of our vessels. This will prevent us from utilizing our fleet at profitable levels,
which could adversely affect our profitability.

Our inability to procure contracts on pricing terms acceptable to us, or at all, may have an adverse
effect on our revenues and profitability. Although we generally endeavor to obtain favorable pricing
terms in contracts for the employment of our vessels where possible, demand and market conditions at
the time of negotiating such contracts may result in us accepting less favorable pricing terms. A failure
to obtain favorable pricing terms in contracts for the employment of our vessels, particularly when a
market is at its inflection point, could lock us into low returns and have an adverse effect on our
financial condition and results of operations.

4. Fluctuations in vessel prices may adversely affect our financial condition and results of operations.

We experience fluctuations in the purchase price of new and secondhand vessels which are affected by
general economic and market conditions affecting the shipping industry, competition from other
shipping companies, types and sizes of vessels and other modes of transportation. The construction of a
vessel may take in excess of 36 months. Our contracts for newbuilding vessels do not provide for
purchase price adjustments based on fluctuations in the market price of newbuilding vessels. As a
result, we may become contractually obligated to purchase a vessel in periods where vessel prices were
high but take delivery of such vessel when vessel prices have declined, so that the market value of the
vessel is below the amount we paid. If the written down value is higher than the market price and the
present value of the future earning potential is not greater than the written down value, we may be
required to recognize the vessel as “impaired” and take a charge for the amount of the impairment
against our earnings.

In addition, as our vessels become older, they generally decline in value. Declining vessel values could
affect our ability to raise cash by limiting our ability to refinance our vessels, thereby adversely
impacting our liquidity. If any vessel is placed as security for our financing arrangements, and there is a
drop in the value of such vessel to the extent that such value falls below the acquisition price, we may
be required to provide additional security in order to maintain such financing arrangements. Failure to
do so may result in such financing arrangement being terminated, and there is no assurance that we will
be able to obtain other financing or incur debt on terms that are acceptable to us or at all.

5. We may experience decreased revenues due to the fluctuations in charter rates, which may have a
material adverse effect on our financial condition and results of operations.

Our operating results are highly dependent on the prevailing charter rates in a given time period.
Charter rates are based in part on supply and demand and are extremely competitive. Over the last
decade, charter rates, vessel values and the general profitability of shipping companies have been
volatile. There can be no assurance that charter rates will increase to previous levels or do so in a
timely manner. Fluctuations in charter rates, or continued stagnation in charter rates, will have a
material adverse effect on our financial condition and results of operations.

6. We may not be able to renew our existing contracts of affreightment on commercially reasonable
terms, or at all, and failure to do so could have an adverse effect on our business and results of
operations.

Certain of our vessels operate under contracts of affreightment (COAs). For example, in our bulk and
tanker division, which contributed to 70.5%, 71.7%, 68.5%, and 63% of our total income for Fiscal

xi
Years 2008, 2009, and 2010 and the three months ended June 30, 2010, respectively, we have five
COAs, two for dry bulk and three for tankers. The COAs for dry bulk will expire in February 2011 and
March 2011, respectively and the COAs for tankers will expire in April 2011, September 2011, and
September 2012, respectively. There is no assurance that we will be able to renew our existing COAs
on commercially reasonable terms, or at all, and failure to do so could have an adverse effect on our
business, financial condition and results of operations.

7. We may not be able to renegotiate our existing contracts of affreightment to address fluctuations in
charter rates, and failure to do so could have an adverse effect on our business and results of
operations.

For our bulk carrier vessels which are operated under COAs, the charter rates are fixed at the time the
COAs are entered into. However, such COAs do not contain any adjustment mechanisms to address
any fluctuations in the prevailing market charter rates. In the event of an increase in such charter rates,
we may not be able renegotiate the agreed rates when the COAs were entered into and benefit from
such increase. This could have an adverse effect on our business, financial condition and results of
operations.

8. Our business and results of operations could be adversely affected by work stoppages, including
strikes, by our work force or any other kind of disputes involving our work force.

Our onshore personnel are members of one of the following organizations: SCI Officers’ Association
Mumbai, SCI Officers’ Association Kolkata, SCI Staff Union Mumbai, Employees’ Union Kolkata,
and SCI Non-Clerical Employees’ Union Kolkata. Our fleet personnel are members of one of the
following three unions, namely, Maritime Union of India (MUI), National Union of Seafarers of India
(NUSI) and Forward Seamans’ Union of India (FSUI). As of September 30, 2010 we are in
negotiations with the representative labor bodies for our onshore personnel regarding an impending
wage revision. There is no assurance that we will be able to negotiate acceptable agreements with the
unionized employees, and failure to do so could lead to a shortage of workers and union-initiated work
stoppages, including strikes which may not be insured or hedged by us.

9. We have experienced shortages of workers, and we may not be able to recruit sufficient numbers of
qualified personnel.

During Fiscal Year 2009, we experienced an acute shortage of fleet officers for our vessels. In order to
retain officers, we have granted salary increases and we have allowed regular officers to receive the
contract officers’ draw. We have also made investments in our Maritime Training Institute. There can
be no assurances that any of the steps we have taken to address the current and anticipated future
shortage of officers will be successful. Our failure to attract and retain qualified officers, and increased
expenditure on personnel costs may adversely affect our business and results of operations.

10. We cannot assure you that we will be able to purchase or acquire new or secondhand vessels
meeting our requirements at prices, delivery times or in a condition acceptable to us.

There can be no assurance that newbuildings we purchase will be completed on schedule or at all.
While we would receive penalty payments from the shipbuilder, delays in the delivery of, or failure to
deliver, one or more of the newbuildings we purchase could have an adverse effect on our business,
financial condition and results of operations. Sellers of secondhand vessels typically provide no
warranties with respect to the condition of the vessels. In addition, secondhand vessels may have
conditions or defects that we were not aware of and our inspections of secondhand vessels prior to
purchase would not normally provide us with the same knowledge about the condition of the vessels
that we would have if the vessels had been built for or operated by us. Accordingly, there can be no
assurance that the purchase of secondhand vessels will not result in higher than anticipated operating
expenditures, including repair costs. There can be no assurance that vessels meeting our size and
quality requirements will be available at prices or delivery times acceptable to us.

xii
11. We may not be able to maintain the size of our owned fleet or chartered fleet, which would affect our
ability to meet our shipping commitments and may have a material adverse effect on our financial
condition and results of operations.

The size of our owned fleet may decrease if we are unable to find suitable replacements for our vessels
due to the risks associated with the construction of newbuildings and the purchase of secondhand
vessels detailed above, or obtain sufficient capital resources to complete the acquisition of identified
vessels. Similarly, the size of our chartered fleet may decrease as each charter is for a specific period of
time, and we may not be able to find suitable vessels at acceptable rates and charter periods to replace
them. COAs require us to provide shipping services in the future at predetermined prices. If our fleet
decreases below the number of vessels needed to meet those commitments or the cost of chartering in
vessels increases above the pre-determined prices, we may suffer losses. There is no assurance that we
will have sufficient capital resources to build or acquire the vessels and equipment to maintain our
vessel fleet size. A significant decrease in the number of vessels in our fleet could adversely affect our
ability to market our fleet and have a material adverse effect on our business, financial condition and
results of operations.

12. The aging of our fleet may result in increased operating costs in the future, which could adversely
affect our earnings.

In general, the cost of maintaining a vessel in good operating condition increases with the age of the
vessel. As of September 30, 2010, the average age of our fleet was 16.1 years. As our fleet ages, we
will incur increased maintenance costs. Older vessels are typically less fuel efficient and more costly to
maintain than more recently constructed vessels due to improvements in engine technology. Cargo
insurance rates increase with the age of a vessel, making older vessels less desirable to charterers.
Governmental regulations and safety or other equipment standards related to the age of vessels may
also require expenditures for alterations, or the addition of new equipment, to our vessels and may
restrict the type of activities in which our vessels may engage. We cannot assure you that, as our
vessels age, market conditions will justify those expenditures or enable us to operate our vessels
profitably during the remainder of their useful lives.

13. We may have difficulty in managing our planned acquisitions of additional vessels.

We intend to grow our business by ordering newbuildings and through selective acquisitions of
additional vessels. In addition to the 29 vessels on order as of September 30, 2010, we currently have
plans to order an additional 20 vessels in Fiscal Year 2011. Our ability to grow our vessel fleet in the
future will primarily depend on:

• timely identification for the need of additional vessels;


• locating and acquiring suitable vessels;
• identifying and completing vessel acquisitions;
• enlarging our customer base;
• managing our expansion;
• the operations of the shipyard any new buildings we may order; and
• obtaining required financing on acceptable terms.

Higher charter rates result in higher vessel values, and accordingly, it may be difficult to consummate
vessel acquisitions at favorable prices during period of high charter rates. In addition, growing any
business by acquisition presents numerous risks, such as managing relationships with customers and
integrating newly acquired assets into existing infrastructure. We cannot give any assurance that we
will be successful in executing our growth plans or that we will not incur significant expenses and
losses in connection with our future growth efforts.

14. We may not be able to acquire additional vessels to address an immediate need of vessel capacity due
to the absence of an active second-hand market for the sale of vessels, and this could have an
adverse effect on our financial condition and results of operations.

Our customers may have an immediate need for vessel capacity from time to time. We may not be able
to address such need for vessel capacity if our existing vessels are already fully utilized, and in the
event that we need to acquire additional vessels to address such need, we may not be able to do so in a

xiii
timely manner due to the absence of an active second-hand market for the sale of vessels. Failure to
acquire the necessary vessels could have an adverse effect on our financial condition and results of
operations.

15. We may not be able to attract and retain key management personnel and skilled employees, which
could adversely affect the results of our operations.

We may be unable to attract and retain key management personnel and employees skilled in the
shipping industry, which would negatively affect the effectiveness of our management, financial
condition and results of operations. Our management personnel make key decisions to maximize our
revenue and earnings in a highly volatile and cyclical industry and our success will depend, in part, on
our ability to hire and retain key members of our management team. The loss of any of these
individuals could adversely affect our business, financial condition or results of operations. Difficulty
in hiring and retaining qualified personnel and crewmembers could also adversely affect the results of
our operations.

Our success depends in large part on our ability to attract and retain skilled employees, such as
management level nautical and engineer officers. Such employees with appropriate knowledge and
experience are scarce and the employment market for such personnel is very competitive. We may
experience a reduction in the experience level of our personnel as a result of any increased attrition,
which could lead to higher unavailability of vessels and more operating incidents, which in turn could
decrease revenues and increase costs. Competition has resulted in inflationary pressure on hiring,
training and retention costs for such personnel. If we are unable to continue to attract and retain skilled
and qualified employees in the future and/or there is a change in labor laws and regulations in a
particular country which restricts our skilled and expatriate personnel from working in such country,
this may affect our ability to operate efficiently. As a public sector undertaking in India, the
Government policies regulate and control the emoluments, benefits and perquisites that we pay to our
employees. We may be unable to compete with private companies for qualified personnel due to their
ability to offer more competitive salaries and benefit packages. Our inability to hire, train and retain a
sufficient number of qualified employees could impair our ability to manage, maintain and grow our
business.

16. Changes in technology may render our current vessel technology obsolete or may require us to make
substantial capital investment.

The technological standards of our vessels, equipment and machinery may change based on the
requirements of the industry. While we currently have a modern fleet and many of our vessels have the
latest technology, the vessels, equipment and processes that we currently use may become obsolete or
less efficient compared to more advanced technology vessels, equipment and processes that may be
developed in the future. The cost to upgrade our vessels or equipment or implementation of such
advanced technology processes could be significant and could adversely affect our results of operations
and financial position.

17. Any disruptions in our implementation plans to our new SCI Enterprise Transformation through
Information Technology (SET-IT) project could have a material adverse effect on our ability to
carry on our business efficiently.

We are in the process of implementing a new comprehensive enterprise resource planning system
across all divisions which will provide us with greater security, reliability and efficiency in major areas
of our operations, including container management, freight booking and reconciliation, spare part
management, agents account management, bunkering, vessel scheduling, dry docking, repair
management, crew management, payroll and billing. The implementation of such technology is
complex and entails significant technical and business risks. We cannot assure you that we will
successfully implement this system in a timely and effective manner. The failure to timely implement
our new SET-IT system may significantly disrupt our business or our ability to report our financial and
operating results. In addition, our failure to adapt our SET-IT systems to customer requirements or
emerging industry standards in the future could have a material adverse effect on our ability to carry on
our business efficiently and could adversely affect our results of operations and financial position.
Furthermore, there is no assurance that our SET-IT system will be able to meet all our business and
operational expectations and this could have an adverse effect on our business and results of operations.

xiv
18. Our industry is highly competitive and subject to intense price competition, which could depress
vessel day rates and utilization rates, thereby adversely affecting our business and financial
performance.

We operate in an intensely competitive industry, and the principal competitive factors include:

• charter rates and other costs, service and reputation of vessel operations and crew;
• national flag preference;
• pre-qualification criteria and prior experience;
• operating conditions;
• suitability of vessel types;
• age of vessels;
• vessel availability;
• technical capabilities of vessels, equipment and personnel;
• safety and efficiency;
• complexity of maintaining logistical support; and
• cost of moving equipment from one market to another.

We compete with local, regional and global companies, many of whom have established reputations
and track records in our industry. We cannot assure you that we will be able to successfully compete in
the markets in which we currently operate and intend to operate. Local competitors in each country in
which we operate may have more domestic experience and better relationships with customers than we
do. In addition, many governments favor, or effectively require contracts to be awarded to local
contractors or require foreign contractors to employ citizens of, or purchase supplies from, a particular
jurisdiction. Such policies may affect our ability to compete effectively. Compared to us, some of our
competitors are larger, have more diverse fleets and businesses, have greater financial and other
resources, greater brand recognition and reputation, greater geographical reach and lower capital costs.
This allows them to better withstand industry downturns, compete on the basis of price, relocate assets
more easily and build or acquire additional assets, all of which may affect our revenues and
profitability. Moreover, if other companies relocate or acquire vessels for operations in the
geographical regions where we operate, the level of competition in such regions may increase, and our
business and financial performance could be adversely affected as demand for our vessels and services
could be negatively affected by increased supply of similar vessels and services.

19. We are subject to hazards customary to the operation of vessels and unforeseen interruptions that
could adversely affect our financial performance, for which we may not be adequately insured or
indemnified. If we are unable to obtain adequate compensation under our insurance coverage, our
business and financial condition would be adversely affected.

Our operations are subject to various operating hazards and risks, including:

• catastrophic marine disasters;


• delays entering foreign ports, including as a result of congestion, or port-state compliance
procedures;
• adverse sea and weather conditions;
• mechanical failures;
• navigation errors and crew negligence;
• vessel collisions;
• oil and hazardous substance spills, containment and clean up;
• labor shortages and strikes;
• unanticipated geological conditions;
• damage to and loss of vessels, drilling rigs and production facilities; and
• war, sabotage, piracy and terrorism risks.

These risks present a threat to the safety of personnel and to our vessels, cargo, equipment under tow
and other property, as well as the environment. We could be required to suspend our operations as a
result of these hazards. In such an event, we would experience loss of revenue and possibly property
damage, and additionally, third parties may have significant claims against us for damages due to

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personal injury, death, property damage, pollution and loss of business. Additionally, we may be
penalized by the relevant authorities if we are determined to be responsible for the occurrence of any of
such hazards. If we are unable to obtain adequate compensation under our insurance coverage, our
business and financial condition would be adversely affected. In addition, please see the risk factor
“We may not have adequate insurance and we are subject to uninsured risks” below.

20. We may not have adequate insurance and we are subject to uninsured risks. If we are not able to
adequately insure against the risks we face, or the insurance coverage we have taken are inadequate
to cover our losses, our business, financial condition and results of operations could be adversely
affected.

We maintain insurance coverage against certain risks which our management considers to be
customary in our industry. For further details, please see the section “Insurance” in section “Our
Business” beginning on page 94. However, we cannot assure you that our insurance will be adequate to
cover all losses that we may incur in the future. If we incur an uninsured loss or a loss in excess of
insured limits or if our insurers fail to fulfill their obligations for the sum insured, we could be required
to pay compensation or lose capital invested in the asset, as well as anticipated future revenue from that
vessel. We would, at the same time, remain liable for any indebtedness or other financial obligation
related to the relevant vessel. Further, while we believe that insurance coverage will be available in the
future, we cannot assure you that such coverage will be available at costs and terms acceptable to us or
that such coverage will be adequate with respect to future claims that may arise. If we are not able to
adequately insure against the risks we face, or the insurance coverage we have taken are inadequate to
cover our losses, our business, financial condition and results of operations could be adversely affected.

21. We rely on consortium partners in four of our five container services.

We operate a network of global container lines services, in consortium with other containership
companies. Our consortium agreements, otherwise known as vessel sharing agreements, are typically
entered to cover the trade route between specific ports like Indian sub-continent, Europe and Far East
for exchanging container slots. Consortium agreements are used to coordinate vessel services and
exchange vessel space, thereby reducing the costly and inefficient over-provision of capacity. Through
such consortium agreements we can enhance the range of ports that we can service while maintaining
separate commercial and marketing operations from our consortium counterparties. The terms of such
consortium agreements typically include route description, slot allocation and operational
responsibilities. Consortium agreements are intended to establish co-operative structures that promote
efficiency and cost reduction. Our ability to operate our container services depends upon the
cooperation and performance of our consortium partners. Our consortium partners are sophisticated and
large organizations. The interests of these consortium partners may differ from our interests. We can
provide no assurance that we will not have disputes with our consortium partners, or that our
consortium partners will continue to do business with us. A dispute with or loss of one of our
consortium partner would have a material adverse affect on our business, financial condition and
results of operations.

22. Increases in interest rates will adversely affect the cost of our borrowings.

Increases in interest rates will adversely affect the cost of our borrowings. Substantially all of our
foreign denominated debts have a floating rate of interest. Such floating interest rate indebtedness is
subject to increases in interest rates, which would increase our finance expenses and could have an
adverse effect on our results of operations. We do not currently enter into any interest rate hedging or
swap transactions in connection with our loan agreements. We cannot assure you that we will be able
to enter into interest hedging contracts or other financial arrangements on commercially reasonable
terms, or that any of such agreements will protect us fully against our interest rate risk. Any increase in
interest expense may have an adverse effect on our business, financial condition and results of
operations.

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23. Our growth depends on our ability to expand relationships with existing charterers and new
charterers in a highly competitive environment.

Shipping charters are awarded based upon a variety of factors relating to the vessel operator, including:

• shipping industry relationships and reputation for customer service and safety;
• shipping experience and quality of vessel operations (including cost effectiveness);
• quality and experience of seafaring crew;
• the ability to finance new vessels at competitive rates and financial stability in general;
• relationships with shipyards and the ability to get suitable berths;
• construction management experience, including the ability to obtain on-time delivery of new
vessels according to customer specifications;
• willingness to accept operational risks pursuant to the charter, such as allowing termination of the
charter for force majeure events; and
• competitiveness of the bid in terms of overall price.

We expect substantial competition from a number of experienced companies, including state-sponsored


entities and major shipping companies. Some of these competitors have significantly greater financial
resources than we do, and can therefore operate larger fleets and may be able to offer better charter
rates. We anticipate that an increasing number of marine transportation companies will enter the
container lines sector, including many with strong reputations and extensive resources and experience.
This increased competition may cause greater price competition for time charters. As a result of these
factors, we may be unable to expand our relationships with existing customers or to obtain new
customers on a profitable basis, if at all, which would have a material adverse effect on our business,
results of operations and financial condition and our ability to pay dividends to our stockholders.

24. Our inability to obtain, renew or maintain our statutory and regulatory permits and approvals
required to operate our business may have an adverse effect on our business, financial condition
and results of operations.

We require certain statutory and regulatory permits and approvals to undertake our business. For more
details, please see the section headed “Government and Other Approvals”. In the future, we will be
required to renew such permits and approvals and obtain new permits and approvals for any new
operations we undertake. There can be no assurance that the relevant authorities will issue any such
permits or approvals in the time-frame anticipated by us, or at all. Failure by us to renew, maintain or
obtain the required permits or approvals may result in the interruption of our operations and may have
an adverse effect on our business, financial condition and results of operations. See the section titled
“Licenses” for further details.

25. Failure to manage our growth could disrupt our business and adversely affect our prospects and
results of operations.

We expect our business to continue to grow significantly. Although we plan to continue to expand our
scale of operations through organic growth acquisitions of vessels as well as of companies and
investments in other entities, we may not grow at a rate comparable to our growth rate in the past,
either in terms of income or profit. We expect our future growth to place significant demands on our
personnel, management and other resources and require us to continuously evolve and improve our
financial, operation and other internal controls across our organization. If we fail to manage our recent
and future acquisitions of vessels or companies (together with related financings) effectively, our
results of operations could be adversely affected. In particular, continued expansion places additional
and new responsibilities on our management on:

• recruiting, training and retaining sufficient skilled and qualified management and technical
personnel;
• adhering to health, safety and environment and quality and process execution standards that meet
client expectations;
• making assumptions on capital expenditure on areas where we have little experience;
• preserving a uniform culture, values and work environment in operations within and outside
India;

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• integrating acquired businesses and assets; and
• developing and improving our operations and our financial, management and legal compliance
information systems.

Any inability to manage our growth may have an adverse effect on our business, prospects and results
of operations.

26. Our business is subject to risks inherent in conducting business internationally that may adversely
affect our operations.

Substantially all of our business is international and requires us to operate outside of Indian coastal
waters. Our international operations are subject to a number of risks inherent to any business operating
in foreign countries, and especially emerging markets. As we continue to expand into new markets, our
international operations will encounter various operating restrictions, risks and hazards, including:

• cabotage laws and the requirement to operate through third party intermediaries who may not be
financially sound;
• government instability, which can cause investment in capital projects by our potential customers
to be withdrawn or delayed, reducing or eliminating the viability of some markets for our
services;
• foreign currency exchange fluctuations;
• government and regulatory requirements across various jurisdictions;
• difficulties and costs of staffing and managing international operations;
• use and compensation of local employees of foreign contractors;
• potential vessel seizure or nationalization of exploration and production assets;
• import-export quotas or other trade barriers;
• difficulties in collecting accounts receivable and longer collection periods;
• political and economic instability, including war and piracy;
• changes to shipping tax regimes;
• imposition of currency exchange controls;
• potentially adverse tax consequences; and
• language and cultural differences.

We cannot predict whether any of the above risks will materialize or whether they would have any
effect on our operations. In addition, our structure and our operations are in part based on certain
assumptions about various foreign and domestic tax laws, currency exchange requirements and capital
repatriation laws. While we believe our assumptions are correct, there can be no assurance that taxing
or other authorities will reach the same conclusions. If our assumptions are incorrect or if the relevant
countries change or modify such laws or the current interpretation of such laws, we may suffer adverse
tax and financial consequences, including the reduction of cash flow available to meet required debt
service and other obligations. This may, in turn, adversely affect our business prospects in the affected
jurisdictions, as well as our financial condition and results of operations.

27. Termination of contracts for the employment of our vessels or inability to obtain contracts for the
employment of our vessels for any significant period may adversely affect our financial condition
and results of operations.

Certain of our vessels operate under spot contracts or under short term charters. We expect to continue
to operate in the spot markets or enter into contracts which are relatively short-term in nature with
respect to some of our vessels. The initial term of some of our charter parties, with attached options,
may be extended on one or more occasions, at the discretion of our customers. Management of
mobilizing of our fleet for optimal use may as a result be difficult, and significant periods may exist
between projects during which our vessels are idle. In addition, our vessel charter contracts may be
subject to early termination by our customers under certain conditions, such as defaults by the parties,
force majeure events, our failure to commence our services on schedule, the loss or destruction of the
vessel and breach of any material provision by us of the charter party. In addition, contracts for the
employment of our vessels may grant our clients the right to terminate such contracts or otherwise
intervene in the performance of such contracts, if they believe that we are not performing our
obligations in a satisfactory manner or in accordance with industry standards, and we are not entitled to

xviii
any termination compensation in such circumstances. Contracts for the employment of our vessels may
also grant our clients a discretionary right to terminate the contract at any time upon relatively short
notice for no reason whatsoever. While some of these contracts have early termination penalties or
other provisions designed to discourage our customers from exercising such options, we cannot assure
you that our customers would not choose to exercise their termination rights in spite of such penalties.
Additionally, customers without contractual termination rights may choose to terminate their contracts
despite the possibility of litigation.

In the event of an early termination of any of contracts for the employment of our vessels, there can be
no assurance that we will then be able to obtain other contracts for the employment of such vessels at
equivalent or higher rates, or at all. If we are unable to obtain contracts for the employment of any of
our vessels for a significant period, or if we are only able to do so at rates lower than previously
obtained, our financial condition and results of operations would be adversely affected.

28. We rely upon agents in ports where our vessels call and their actions may adversely affect our
business, financial condition and results of operations.

We depend upon agents at the ports where we operate to arrange husbanding for our vessels. These
agents act as intermediaries in securing cargo for our vessels and arranging terms. Most of these agents
are not our employees and therefore have limited ability to control their actions or their procedures. If
an agent were to violate the law or otherwise not act within our best interests, on any omission
including an agent’s failure to collect and remit to us amounts payable from our customers, our
business, financial condition and results of operations could be adversely affected.

29. Our results of operations may be adversely affected by foreign currency exchange rate fluctuations
and movements in interest rates as well as changes to the accounting treatment of the effects of such
fluctuations and movements.

While our reporting currency is in Indian Rupees, a significant portion of our revenue and expenditure
is denominated in foreign currencies. As a result, we are exposed to foreign currency exchange rate
fluctuations and exchange rate risks, which may affect our financial performance and results of
operations. We derive most of our revenues from contracts for the employment of our vessels that are
denominated in foreign currencies, primarily the US Dollar. Any appreciation in the value of the Indian
Rupee in relation to the value of the applicable foreign currency could adversely affect our reported
operating revenues. Additionally, some of our operating costs and the majority of our interest costs are
denominated in foreign currencies, primarily the US Dollar. While this may help reduce the impact of
foreign currency exchange rate movements to a certain extent, our results of operations may be
adversely affected by an appreciation in the value of the Indian Rupee. Movements in exchange rates
may also result in foreign currency translation gains or losses on current assets and liabilities including,
significantly, bank balances and debtors, thereby affecting our profit and loss account.

To minimize the impact of foreign exchange fluctuations on our cash flows, we attempt to match the
currency of our debt with the currency of our revenue. While depreciation in the value of the Indian
Rupee against foreign currencies has a favorable impact on our revenues, it will result in an increase in
the servicing costs on our foreign currency denominated debt and the value of our foreign currency
denominated debt on our balance sheet. We currently account for the effect of fluctuations in exchange
rates on the repayment of loans borrowed and the revaluation of foreign currency loans for the
acquisition of depreciable capital assets by adjusting the cost of the asset on our balance sheets. This
may affect our financials through depreciation charges. However, with effect from April 1, 2011, as a
result of an anticipated change in accounting rules as well as the implementation of IFRS, we would be
required to account for such fluctuations on our profit and loss account. This would affect our results of
operations.

The exchange rate between the Indian Rupee and the US Dollar has changed substantially in the recent
years and may continue to fluctuate significantly in the future. For example, according to statistics from
the International Monetary Fund, during 2009, the Indian Rupee depreciated against the US Dollar by
approximately 19.5%. Further, any changes in the policies of the Reserve Bank of India relating to
foreign exchange derivatives may limit our ability to hedge our foreign currency exposures adequately.

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30. We will be required to prepare our financial statements in accordance with IFRS converged
standards and will have to prepare the opening balance sheet in accordance with IFRS converged
standards as of April 1, 2011. Reporting under the IFRS converged standards could result in a
change in our functional currency and consequent risk management policies, among other changes.
There can be no assurance that our adoption of IFRS converged standards will not adversely affect
our results of operations and any failure to successfully adopt IFRS converged standards could have
an adverse effect on the price of the Equity Shares.

The Ministry of Corporate Affairs has announced a road map for the convergence of the Indian
Accounting Standards with IFRS. As a result, certain companies in India, including us, will be required
to convert their opening balance sheet as of April 1, 2011 in compliance with the notified IFRS
converged standards. There is currently a significant lack of clarity on the convergence with IFRS and
IFRS converged accounting standards are yet to be notified. We also do not have a set of established
practices on which to draw on in forming judgments regarding the convergence. As such, we have not
determined with any degree of certainty the impact that IFRS convergence will have on our financial
reporting, although we have recently engaged external advisors to assist us identify the potential impact
of IFRS on our accounting and business practices. The adoption of IFRS will pose additional
challenges and is likely to place significant strain on our management and resources, including our
ERP system, particularly in the initial stages of implementation. We anticipate that the adoption of
IFRS could, among other things:

• require change in the functional currency from the Indian Rupee to the US Dollar, which changes
our exposure to foreign currency exchange fluctuations and the resultant risk management and
hedging policies;
• require us to maintain parallel accounts under IFRS converged standards as well as Indian GAAP
during the transition period;
• potentially introduce greater volatility into our financial reporting, due to the need to apply critical
accounting estimates with respect to values or conditions which cannot be known with certainty at
the relevant time;
• impose additional disclosure requirements, including disclosure relating to critical judgment in
applying accounting policies; and
• result in changes in accounting policies and method of recognition with respect to property, plant
and equipment, inventory, financial instruments and foreign currency transactions.

There can be no assurance that our financial condition, results of operations, cash flows or changes in
shareholders’ equity will not appear materially different under the IFRS converged standards as against
current Indian GAAP. As we transition to IFRS reporting, we may encounter difficulties in the ongoing
process of implementing and enhancing our management information systems. We could also incur
additional implementation costs, which may be substantial. Moreover, there is increasing competition
for the small number of accounting personnel experienced with IFRS as more Indian companies begin
to prepare IFRS converged financial statements. There can be no assurance that our adoption of IFRS
converged standards will not adversely affect our results of operations or financial condition. Any
failure to successfully adopt IFRS converged standards with effect from April 1, 2011 could have an
adverse effect on the price of the Equity Shares.

31. We rely on a number of key customers for a large portion of our revenue.

We have derived and believe that we will continue to derive in the near term a significant portion of
our revenue from a few key customers. For Fiscal Years 2008, 2009 and 2010 and the quarter ended
June 30, 2010, our five largest customers accounted for approximately 37%, 45%, 44% and 41% of our
operating revenue, respectively. The revenue from these customers may vary from year to year. Any
loss of our key customers or any significant decreases in spending by some or all of our top five
customers on our services may reduce the demand for our vessels and the services we offer and may
adversely affect our revenue, profitability and results of operations.

We expect that a significant portion of our income will continue to be attributable to a limited number
of customers in the foreseeable future and if any of these customers reduce their business with us, it
may result in low capacity utilization of our resources, which could adversely affect our profitability
and results of operations.

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In addition, our income may be affected by competition, increases in fuel prices, the cyclical nature of
the shipping industry and decreasing tariffs in the port and related services industry and a number of
factors, other than our performance, that could cause the loss of a customer and that may not be
predictable such as financial difficulties, bankruptcy or insolvency affecting our customers. Our
customers, some of whom have experienced substantial competition and other pressures on their
profitability, may demand price reductions and/or other value-added services for no additional charge,
which could reduce our profitability. Any significant reduction in or the elimination of the use of the
services we provide to any of our customers, or any requirement to lower our prices, could harm our
business.

32. We are exposed to the credit risks of our customers and certain other third parties, and the non-
payment, non-performance or insolvency of these parties could adversely affect our financial
condition and results of operations.

We are exposed to credit risks with respect to local agents with whom we co-operate in rendering
services to certain of our international customers. In certain countries, due to local regulations or
business requirements, we are required to deploy our vessels to the end users of such vessels through
local agents, with whom we enter into contracts. Under such arrangements, we receive payments
through such agents, and not directly from the end users of our vessels. Some of these local
intermediaries may not be as financially sound as the end users of our vessels. If any of our
counterparties fail to make payments received from customers to us or become insolvent, we would
suffer losses and our business, financial condition and results of operations could be adversely affected.

33. We have high levels of fixed costs that will be incurred regardless of our level of business activity.
Non employment of vessels or low productivity due to reduced demand, weather interruptions or
other causes can have a significant negative effect on our results of operations and financial
condition as a consequence.

Our business has high fixed costs as our interest costs and operating and maintenance costs will not
necessarily fluctuate in proportion to changes in operating revenues. Operating revenues may fluctuate
as a function of changes in day rates. However, interest costs and costs for operating our vessels are
generally fixed or only semi-variable regardless of the day rates being earned. In addition, should our
vessels incur idle time between contracts, we typically do not reduce staff as we require the personnel
onboard to prepare the vessel for its next voyage. During times of prolonged reduced activity,
reductions in costs may not be immediate as portions of the onboard personnel may be retained for a
period of time, after which they are assigned to active vessels or their contracts conclude. Non
employment of vessels or low productivity due to reduced demand, weather interruptions or other
causes can have a significant negative effect on our results of operations and financial condition as a
consequence.

34. We are susceptible to unexpected increases in operating costs, which may exceed estimates upon
which our long-term contracts for the employment of our vessels are based and this could adversely
affect our results of operations.

As most of our long-term contracts for the employment of our vessels are on a fixed day rate basis, we
have a limited ability to adjust rates in response to any increase in the costs of maintenance, repairs,
spare parts, salaries, consumables and compliance with any new rules and regulations. Such costs are
unpredictable and fluctuate based on events beyond our control, and any substantial increase in such
costs would adversely affect our profitability. The mismatch of potentially increasing costs and fixed
day rates is exacerbated by the option given to customers under some contracts to extend such contracts
at the day rates applicable during the initial contractual term.

Our actual costs and any gross profit realized on our fixed day rate contracts for the employment of our
vessels will often vary from the estimated amounts on which these contracts were originally based.
This may occur for various reasons including, among other things, errors in estimates or bidding,
changes in availability and cost of labor and materials, as well as lower day rates applying for longer
periods than originally estimated. These variations and the risks inherent in our industry may result in
reduced profitability or losses on contracts. Depending on the duration of a contract, minor variations
from estimated contract performance could also result in an adverse effect on our results of operations.

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35. Some of the cargo we carry may not be claimed by their recipients resulting in loss of ground rent.

In case the recipients do not claim the cargo we deliver we lose our ground rent. Although, we are
authorized to auction such abandoned cargo, if not claimed within the contracted number of days, to
recover our dues, the auction proceeds may not be sufficient to cover our dues, and this may adversely
affect our business, financial condition and results of operations.

36. We have been unable to locate certain of our corporate records, including with respect to the
issuance and transfer of certain details of equity shares acquired by our Promoter.

We have been unable to locate certain of our corporate records including with respect to the acquisition
of a total 162,012 equity shares of Rs. 100 each by our Promoter in 1957 and 1972, respectively. For
details, see “Capital Structure” beginning on page 58.

37. We may be unable to meet certain obligations in contracts for the employment of our vessels,
including timeliness of delivery of cargo.

We may be unable to meet certain contractual obligations including timeliness of delivery. In our
various shipping contracts, we have commitments for safe and timely delivery of cargo. Any failure to
meet the scheduled timelines set by our customers or loss or damage to cargo may lead to our
customers raising claims against us. Assertion of one or more legal claims against us could have an
adverse effect on our business. In the past, customers have raised claims against us for short landing,
damage to cargo and delay in delivery of cargo. Some of these claims have resulted in suits filed in
various forums against our Company. While we are insured against such risks, there is no assurance
that our insurance would be sufficient to cover us for these risks completely and we would be liable to
the customer for amounts exceeding our insurance limits.

38. Our containerships are subject to strict schedules, and any delays could adversely affect our
financial condition and results of operations.

Each of our containerships must adhere strictly to certain schedules, as each terminal that it is
scheduled to stop at has a specific time window allocated to it. Failure to reach a particular port in time
to utilize the full time window may result in delay in delivery of cargo which could lead to customers
bringing claims against us. In order to prevent any delays by shortening the travelling time, we may
need to increase the speed of our containers, which requires higher fuel consumption and as a result, we
will incur additional costs. Occurrences of delay and the consequential claims made by the clients
would have an adverse effect on our business, financial condition and results of operations.

39. We are parties to joint ventures where we may not have significant control whichentail business
risks.

We have entered into various strategic joint venture agreements with third parties. The success of these
business collaborations depends significantly on the satisfactory performance by our strategic partners
of their contractual and other obligations. As we do not exercise any control on our joint venture
partners, we face the risk that they may not perform their obligations in a satisfactory manner, or at all.
If they fail to perform their obligations satisfactorily or at all, we may be unable to successfully carry
out our operations. In such a circumstance, we may be required to make additional investments or
become liable for our partners’ obligations, which could result in additional liability that may adversely
affect our business. Our joint ventures may face difficulties in their operations due to a variety of
circumstances, which could have an adverse effect on our business, results of operations and financial
condition. If the interests of our joint venture partners conflict with our interests, this and other factors
may cause our joint venture partners to act in a manner that is contrary to our interests, or otherwise be
unwilling to fulfil their obligations under our arrangements with them. Any of the foregoing could have
an adverse affect on our business, results of operations, financial condition and reputation.

xxii
40. We may incur higher operating costs as we are required to register our vessels in India, and Indian
flag vessels incur certain higher charges.

Under the provisions of the Merchant Shipping Act, 1958 (the “Merchant Shipping Act”), our
Company is required to register all our vessels in India. Further the crew of the vessels registered in
India under the Merchant Shipping Act has to be registered under the Merchant Shipping Act.
Accordingly, we may have to incur higher expenditure to meet such manning requirements prescribed
by the compared to our competitors whose vessels are flagged under different jurisdictions. We may
also have to incur additional expenditures at various international ports where there is a requirement to
engage local agents for certain services and as a result our business margins may be affected which
would impact our business and results of operations.

41. Our operations may be adversely affected in the event of any significant unavailability of vessels or
equipment.

In the event of any extensive servicing or repair, there will be a prolonged and significant unavailability
of our vessels or equipment resulting in major disruptions to our operations. We may not be able to
meet the demand for our services as these vessels that are under maintenance or repair cannot be
chartered out during their downtime. As a result we may not be able to capitalize on the new business
opportunities available in the market. In the event we are affected by such prolonged and significant
unavailability of our vessels or equipment, our business and financial condition may be adversely
affected.

42. We have not entered into any contracts to employ the vessels which we intend to acquire using the
proceeds of the Issue, and if we fail to secure sufficient demand for our newly acquired vessels, or at
all, our financial condition and results of operations would be adversely affected.

In line with our goal to have a diversified young fleet, we intend to utilize a portion of the proceeds of
the Issue to partially finance the construction of the vessels identified by the Company, which was
based on the annual acquisition plan approved by our Directors. However, we currently have not
entered into or finalized any demand for the employment of such vessels. Securing sufficient demand
for our vessels are dependent on various factors that are beyond our control. There is no assurance that
we will secure sufficient demand for employment of our newly acquired vessels, or at all, and this
could adversely affect our financial condition and results of operations.

43. We have not entered into any definitive agreements to use a portion of the proceeds of the Issue and
our estimates of use of proceeds are internal estimates.

The use of the Net Proceeds is at the discretion of the management of our Company, although it is
subject to monitoring by an independent agency. As described in the “Objects of the Issue” beginning
on page 67, we intend to use a portion of the proceeds from the Issue for the acquisition of vessels.
However, we have not entered into any definitive agreements and do not have any definite and specific
commitments for such acquisitions. The cost of acquisition of vessels is not independently appraised by
any financial institution and is based on internal management estimates. We may not be able to
conclude such agreements or commitments on terms anticipated by us, or at all. We cannot assure you
that the actual cost of acquisition of the vessels identified would correspond to the cost estimated by
our management.

44. The proceeds raised in this issue are subject to market and credit risks, pending utilization.

We intend to use the net proceeds received from the Issue in accordance with the “Objects of the Issue”
beginning on page 67. Pending utilization for the purposes described in the “Objects of the Issue”, we
intend to temporarily invest funds in instruments that we deem to be creditworthy, including money
market mutual funds and deposits with banks. Factors such as interest rates, exchange rates and the
creditworthiness of the counterparty, amongst others, may have a materially adverse effect on these
investments which may result in our inability to use the proceeds raised in this Issue in the manner
indicated by us.

xxiii
45. We may not be able to use to proceeds of the Issue to purchase vessels in accordance with the
schedule set forth by our Company.

We may not be successful in utilizing the proceeds of the issue to finance the acquisition of vessels
identified in the “Objects of the Issue” beginning on page 67. Our Board may modify its annual vessel
acquisition program based on then prevailing market conditions which may require adding or deleting
vessels from the Company’s originally approved acquisition list. The acquisition cost of new vessels is
not independently appraised by any financial institution and is based on internal management
estimates. Such estimates may be inaccurate and may have a material impact on our ability to acquire
new vessels or the timing of such acquisition. In addition, once we have extended tenders for the
acquisition of new vessels, the acquisition plan may be subject to deferment, cancelation or amendment
if the technical or commercial bids offered do not match our requirements. We may not be successful
in entering into contracts with the shipbuilders during the fiscal period scheduled for acquisition of new
vessels. We may not be able to secure the necessary financing in a timely manner, or at all. We may
experience delays in delivery of new vessels which may affect our funding deployment schedule.
Accordingly, there can be no assurance that we will be able to acquire additional vessels in accordance
with the schedule set forth by our Company, or at all.

46. We rely on a single customer to charter our fleet of anchor handling and towing supply vessels, and
any failure to renew the charters may have an adverse effect on the utilization of our anchor
handling and towing supply vessels.

As of September 30, 2010, we own a fleet of ten anchor handling and towing supply vessels (AHTVs),
all of which are on long term charter to Oil & Natural Gas Corporation Limited (ONGC) which will
expire between 2012 and 2013. There can be no assurance that we will be able to renew our contracts
with ONGC when the contracts come up for renewal and there can be no assurance that we will be able
to replace business lost due to the non-renewal of such contracts which may have an adverse effect on
the utilization of our AHTVs. This may result in our AHTVs incurring idle time between contracts and
resulting in additional expenses, which would have an adverse effect on our business, financial
condition and results of operations.

47. We have referred to the data derived from certain industry reports commissioned by third parties.
The data is subjected to various assumptions and limitations.

We have referred to the data derived from certain industry reports commissioned by third parties.
These reports are based upon various limitations and assumptions which are subjective and uncertain.
There can be no assurance that the assumptions adopted in these reports for the purposes of preparing
their research report will prove to be accurate. If any of these assumptions are incorrect, the
development of the port industry in India could be materially different from that set forth in such report.
Accordingly, investors are advised not to place undue reliance on the data derived from this report in
their investment decisions.

48. Our funding requirements and deployment of the Net Proceeds are based on management estimates
and have not been independently appraised.

Our funding requirements and the deployment of the Net Proceeds are based on management estimates
and have not been appraised by any bank or financial institution. Though the deployment of the
proceeds from the Issue will be monitored by the monitoring agency, the figures included under
“Objects of the Issue” beginning on page 67 are based on our own estimates. In view of the highly
competitive nature of the industry in which we operate, we may have to revise our management
estimates from time to time and consequently our funding requirements may also change. This may
result in the rescheduling of our expenditure programs and an increase or decrease in our proposed
expenditure for a particular matter.

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49. Our credit facilities or other financing arrangements contain restrictive covenants that may limit our
liquidity and our ability to expand our fleet.

Our current credit facilities impose certain restrictive covenants whereby we are required to obtain
prior approval from our lenders for various actions, including inter alia:

• effect any changes to the business of the Company without the prior written consent of the
lender;

• effect any corporate reorganization such as amalgamation, merger or demerger without the
prior written consent of the lender;

• declare or pay dividend in the event of occurrence of an event of default, without the prior
written consent of the lender; and

• sell or dispose of substantial portion of the assets of the Company without the prior written
consent of the lender.

In addition to the above, there are financial covenants and cross default provisions under various loan
agreements to which the Company is a party.

A failure to meet our obligations under any of our loan agreement would trigger the cross default
provisions under other loan agreements to which we are party. This may result in an acceleration of the
loans or foreclosure of the vessels in our fleet securing those credit facilities. The loss of these vessels
would have a material adverse effect on our financial condition and results of operations.

50. We have certain contingent liabilities not provided for which may adversely affect our financial
condition.

For Fiscal Year 2010 and the three month period ending June 30, 2010 we had contingent liabilities
totaling Rs. 3,795 million and Rs. 3,910 million, respectively. Such contingent liabilities may become
due based on future events outside of our control. Such contingent liabilities are difficult to quantify
and may result in actual liabilities higher than those reflected in our financial statements. If such
contingent liabilities become due, this could adversely affect our financial condition and results of
operations.

51. Announcements by the Government relating to increased wages for government and public sector
employees will increase our expenses and may adversely affect our financial condition in the years
of implementation.

In the past, the Department of Public Enterprises (“DPE”) has required government enterprises to
implement salary increases for employees below executive level as determined by the respective boards
and management of the relevant government enterprises within a certain guideline set by the DPE.
These governmental measures increase our labour costs and there is no assurance that additional
measures or further increases will not be introduced by the Government. Any announcements by the
Government relating to increased wages for government and public sector employees will increase our
expenses and may adversely affect our operating results and financial condition.

52. The grant of stock options under our employee stock option schemes may result in a dilution in your
shareholding and could result in a charge to our profit and loss account, thereby adversely
impacting our results of operations.

The Government has recommended that all public sector undertakings should formulate an employee
stock option plan (“ESOP”) and that 10% to 25% of the performance related payment to employees
should be paid as stock options pursuant to such ESOP. Accordingly, any issuance of stock options
under the ESOP could dilute your shareholding, and could result in a charge to our profit and loss
account, thereby impacting out results of operations.

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53. We have undertaken, and expect to continue to undertake, business in countries subject to E.U. or
U.S. sanctions and embargoes

The United States has certain laws and regulations that impose restrictions upon U.S. companies and
persons, or U.S. persons, and, in some contexts, foreign entities and persons (“U.S. Economic
Sanctions Laws”), with respect to activities or transactions with certain countries, governments, entities
and individuals that are the subject of U.S. Economic Sanctions Laws (“Sanctions Targets”). Under
U.S. Economic Sanctions Laws, U.S. persons are also generally prohibited from facilitating a non-U.S.
person’s undertaking such activities or transactions. In addition, the Council of the European Union has
adopted restrictions on trade with entities associated with certain jurisdictions, including a council
decision of July 26, 2010 concerning restrictive measures against Iran.

We have engaged and continue to engage in business with counterparties, including government-owned
or controlled counterparties, in certain countries that are Sanctions Targets, including Iran and Sudan.
Our tankers are out-chartered to certain third parties, and as a result of these charter arrangements
transport crude oil from Iranian and Sudanese oil terminals to India. In Fiscal Years ended 2008, 2009
and 2010, we derived approximately Rs. 721.3 million, Rs. 1,860.9 million and Rs. 1,160.3 million in
income from this business, or 1.8%, 4.1% and 3%, respectively of the Company’s total income. In
addition, our bulk carriers are from time-to-time chartered to deliver dry bulk cargo to Iran and to
transport dry bulk cargo from Iran. In Fiscal Year 2010 we derived approximately Rs. 13.22 million in
income from this business or 0.03% of the Company’s total income for such year. Prior to the
imposition of the United Nations sanctions, our liner service also transported containers to and from
Iran via feeder service from Dubai. In Fiscal Years 2008, 2009 and 2010, we derived an immaterial
amount of revenue from this business. Although Libya is not currently a Sanctions Target, we have
also transported crude oil from Libya and have had dry bulk charters to and from Libya, at times when
Libya was a Sanction Target.

In addition, our bulk carriers may from time to time call on ports in Sanctions Targets. In this business,
a party not required to comply with U.S. Economic Sanction Laws may charter our bulk carriers to
transport cargo to a Sanction Targets. These Sanction Targets have included countries in the Baltic
Region, Ivory Coast and Syria. In addition, our containerships transport container shipments between
India and Myanmar via feederships to Singapore. We also have freight forwarding agents located in the
Sanctions Targets who we pay to help arrange charters for us involving cargo from ports located there.

Although we believe that we are not required to comply with U.S. Economic Sanctions Laws or the
E.U sanctions, our customers or other counterparties may be required to comply with them. If any of
our customers who are subject to these restrictions are found to have violated them, we could become
entangled in legal proceedings or investigations or made subject to fines. Any of these developments
could have a material adverse effect on our business and reputation.

In addition to the sanctions described above, the U.S. government may impose (and has in the past
imposed from time to time) restrictions and sanctions against other countries, including ones in which
we do business. The U.S. government may also impose new or expanded restrictions and sanctions
against existing Sanctions Targets. Any such measures targeting countries in which we undertake
business could reduce the level of international trade with those countries, which could have a material
adverse effect on our business and reputation.

54. Our Joint Venture Partner, Islamic Republic International Shipping Line, is the subject of UN
Sanctions.

The Company has since 1975 held a 49% interest in Irano-Hind Shipping Company (“Irano-Hind”), a
company also owned 51% by the Islamic Republic of Iran Shipping Lines (“IRISL”). IRISL is a
company whose shares are owned by the Islamic Republic of Iran. Irano-Hind is the subject of
sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury
(“OFAC”) both because of the indirect 51% ownership by the Islamic Republic of Iran and because
Irano-Hind has been identified by OFAC as an entity engaged in the proliferation of weapons of mass
destruction. Irano-Hind is also the subject of sanctions against proliferators of weapons of mass
destruction contained in a Resolution of the United Nations Security Council. The total aggregate
income received, in the form of dividends, from Irano-Hind for Fiscal Years 2008, 2009 and 2010 was

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approximately Rs. 19.3 million, Rs. 20.9 million, and Rs. 23.2 million, respectively, or less than 0.10%
of the Company’s total income in each such year.

Through Security Council Resolution 1929, the U.N. imposed additional sanctions on Iran on June 9,
2010, out of concerns that Iran had failed to comply with previous U.N. resolutions targeting Iran’s
nuclear and ballistic missile programs. Security Council Resolution 1929 authorizes states to inspect
and seize cargo to and from Iran if there are reasonable grounds to believe the cargo contains materials
related to Iran’s nuclear and ballistic missile programs. Security Council Resolution 1929 targets
specific individuals and entities that support Iran’s nuclear and ballistic missile programs, including
travel restrictions and the blocking of assets. Specifically, the Resolution calls for states to freeze the
assets of IRISL and Iran-o-Hind. If any assets of Irano-Hind are frozen pursuant to Security Council
Resolution 1929, our revenues from Irano-Hind could be materially adversely affected. In addition, if it
is found that Irano-Hind has proliferated weapons of mass destruction, our reputation may be damaged.

55. There are outstanding legal proceedings against our Company and our Directors.

There are outstanding legal proceedings against our Company and our Directors. These proceedings are
pending at different levels of adjudication before various courts, tribunals, enquiry officers, appellate
tribunals and arbitrators in different jurisdictions. An adverse outcome in these proceedings could have
a material adverse effect on our reputation, business or prospects. In addition, further liability may arise
out of these claims. Brief details of such outstanding legal proceedings, wherein the claim amount is at
least Rs. 50 million, as of the date of the Draft Red Herring Prospectus are as follows:

Litigation against our Company


Rs. in Million
Sr. No. Nature of cases No. of outstanding cases Amount Involved
1. Criminal Cases 5 -
2. Civil Cases 7 1,584.17
3. Tax Cases 3 981.86

For further details of outstanding legal proceedings against our Company and our Directors see “Outstanding
Litigations and Material Developments” beginning on page 232.

56. We may be subject to certain anti-trust laws under the laws different jurisdictions that may adversely
affect our business, financial condition and results of operations.

We are subject to anti-trust rules under the laws of various jurisdictions where we operate, which seek
to prevent formation of monopolies in the market. These anti-trust laws may prevent us from forming
consortia to operate our business or from entering into vessel sharing agreements, which would have
adverse impacts on our results of operations and financial condition. In jurisdictions such as the
European Union, liner shipping companies are granted exemption from the anti-trust laws till 2015,
however, there is no assurance that such exemption will not be revoked or be extended further. Further,
we may also be subjected to restrictions under the competition laws in India. In the event of such
restrictions under such anti-trust laws are imposed on us, we may not be able to conduct certain aspects
of our operations as currently operated, which will affect our business, results of operations and
financial conditions.

57. We do not own the “ ” trademark, and our ability to use the trademark and logo may be
impaired.

The “ ” trademark, name and logo do not belong to us. We have not made any application for the
registration of the “ ” trademark in our name. Accordingly, we may not be able to efficiently
prevent any unauthrorised use of the logo and trademark. Any such unauthorized usage of the logo
could result in the dilution of the brand recognized with our Company and loss of reputation which
may result in adverse effects to our business and results of operations.

xxvii
External Risks (Risks External to our Business)

58. If the shipping industry, which historically has been cyclical, continues to be depressed in the future,
our earnings and available cash flow may be adversely affected.

The tanker industry is both cyclical and volatile in terms of charter rates and profitability. The recent
global financial crisis may adversely affect our ability to recharter our vessels or to sell them on the
expiration or termination of their charters and the rates payable in respect of our one vessel currently
operating in a tanker pool, or any renewal or replacement charters that we enter into may not be
sufficient to allow us to operate our vessels profitably. Fluctuations in charter rates and tanker values
result from changes in the supply and demand for tanker capacity and changes in the supply and
demand for oil and oil products. The factors affecting the supply and demand for tankers are outside of
our control, and the nature, timing and degree of changes in industry conditions are unpredictable.

The factors that influence demand for tanker capacity include:

• demand for oil and oil products;


• supply of oil and oil products;
• regional availability of refining capacity;
• global and regional economic and political conditions;
• the distance oil and oil products are to be moved by sea;
• changes in seaborne and other transportation patterns;
• environmental and other legal and regulatory developments;
• currency exchange rates;
• weather;
• competition from alternative sources of energy; and
• international sanctions, embargoes, import and export restrictions, nationalizations and wars.

The factors that influence the supply of tanker capacity include:

• the number of newbuilding deliveries;


• the scrapping rate of older vessels;
• conversion of tankers to other uses;
• the price of steel;
• the number of vessels that are out of service; and
• environmental concerns and regulations.

Historically, the tanker markets have been volatile as a result of the many conditions and factors that
can affect the price, supply and demand for tanker capacity. The recent global economic crisis may
further reduce demand for transportation of oil over longer distances and supply of tankers to carry that
oil, which may materially affect our revenues, profitability and cash flows.

59. Our growth depends upon continued growth in demand for shipping services.

The international shipping industry is both cyclical and volatile in terms of charter hire rates and
profitability. Charter-hire rates have dropped significantly in the past twelve months. Fluctuations in
charter rates result from changes in the supply and demand for vessel capacity and changes in the
supply and demand for the major products internationally transported by vessels. Although in the last
few decades there has been a trend toward shipping companies chartering-in vessel capacity from
charter owners, such as us, if this trend changes, demand for our vessels could be reduced. This and
other factors affecting the supply and demand for vessels and supply and demand for products shipped
on the type of vessels we operate are outside of our control, and the nature, timing and degree of
changes in industry conditions are unpredictable.

The factors that influence demand for our shipping services include:

• supply and demand for dry and wet cargo;


• changes in global production of cargo;
• the distance products are to be moved by sea;

xxviii
• the globalization of manufacturing;
• global and regional economic and political conditions;
• developments in international trade which affect cabotage and local laws;
• changes in seaborne and other transportation patterns;
• environmental and other regulatory developments; and
• weather conditions.

The factors that influence the supply of vessel capacity include:

• the number of new building deliveries;


• the scrapping rate of older vessels;
• the cost of building of new vessels and drydocking vessels for repair;
• the price of steel and other raw materials;
• changes in environmental and other regulations that may limit the useful life of vessels;
• the number of vessels that are out of service; and
• port or canal congestion.

Our ability to re-charter our vessels upon the expiration or termination of their current charters and the
charter rates payable under any renewal or replacement charters will depend upon, among other things,
the prevailing state of the shipping market. If the charter market is depressed when our vessels’ charters
expire, we may be forced to re-charter our vessels at reduced rates or even possibly a rate whereby we
incur a loss, which may reduce our earnings or make our earnings volatile. The same issues will exist if
we acquire additional vessels and attempt to obtain multi-year time charter arrangements as part of our
acquisition and financing plan.

60. An over-supply of vessels may lead to increased competition and reductions in the demand for our
vessels and our profitability.

The market supply of vessels has increased by 6.7% from 2008 to 2009 (UNCTAD – RMT 2009).
There are a large number of vessels being built and industry participants have placed a large number of
orders for new vessels to be built and delivered over the next few years. We have been subject to
increased competition from new vessels mobilizing into regions in which we operate. An over-supply
of vessels may result in increased competition and reductions in the demand for our vessels and our
profitability. There is no assurance that our vessels will be optimally utilized. For example, if such a
reduction occurs upon the expiration or termination of our vessels’ current charters, we may only be
able to re-charter those vessels at reduced or unprofitable rates or we may not be able to charter our
vessels at all.

61. Our vessels are exposed to pirate attacks, which could potentially disrupt our operations as well as
harm our business in various ways.

Acts of piracy or any similar acts may disrupt the operations of our vessels. Such acts may adversely
affect our operations in unpredictable ways, including causing changes in the insurance markets and
disruptions of fuel supplies and markets. The occurrence of pirate attacks could result in the regions in
which we operate being characterized as “war risk” zones by insurers, as the Gulf of Aden temporarily
was in May 2008. If this were to occur, premiums payable for insurance coverage could increase
significantly and such coverage may be more difficult to obtain. In addition, crew costs, including costs
in connection with employing onboard security guards, could increase in such circumstances.
Government agencies that currently provide free escort and security support may charge us for such
services in the future. In addition, such pirate attacks and its associated negative publicity as well as
potential danger to personnel onboard may have a material adverse effect on our liner business, and
may result in loss of revenues, increased costs and decreased cash flows to us. We may not be
adequately insured to cover losses from these incidents. More importantly, it may result in short
landing, damage to cargo and delay in delivery of cargo, and any failure to meet the scheduled
timelines set by our customers or loss or damage to cargo may lead to our customers bringing claims
against us, which could have an adverse effect on our business, financial condition and results of
operations.

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62. Rising fuel prices and other unexpected expenses may adversely affect our profitability.

The price and supply of fuel is unpredictable and fluctuates based on events outside our control,
including geopolitical developments, supply and demand for oil and gas, actions by Organization of the
Petroleum Exporting Countries and other oil and gas producers, war and unrest in oil-producing
countries and regions, regional production patterns and environmental concerns. As a result, an
increase in the price of fuel may adversely affect our profitability. In the last decade, the prices for fuel
have been increasing as well as volatile. A significant or sustained increase in the price of fuel or
reduction in supply could increase our operating expenses and we may not be able to successfully pass
on the costs to our customers and have a material adverse effect on our financial condition and results
of operations. Such increase may also reduce the profitability and competitiveness of our business
versus other forms of transportation, such as truck or rail.

63. Changes in laws, effective tax rates, adverse interpretation of tax law or an adverse outcome of any
significant tax dispute could adversely affect our results of operations.

Our future effective income tax rates could be adversely affected by changes in tax laws, both in India
and overseas. We currently enjoy certain tax benefits in India under the Income Tax Act, the tonnage
income is excluded. For further details, see “Statement of Tax Benefits” beginning on page 75 and
“Management’s Discussion and Analysis on Financial Condition and Results of Operations” beginning
on page 198. Our ability to avail of tonnage tax benefits in India is subject to compliance of certain
conditions, including:

• minimum training of trainee officers on board of vessels in accordance with the guidelines of the
Directorate General of Shipping;
• the annual transfer of a minimum amount of profit to the tonnage tax reserve account; and
• utilization of tonnage tax reserve fund only for specific purposes as specified in the Income Tax
Act, 1961, as amended from time to time.

Failure to comply with any of the aforementioned conditions may adversely affect the availability of
the benefits under tonnage tax system. In addition, each tonnage tax certificate is granted for a period
of 10 years and we are required to renew our tonnage tax certificates to continue to enjoy the benefits
of the scheme. There can be no assurance that we will be able to renew these certificates in a timely
manner, or at all.

As we operate in various jurisdictions around the world, we are subject to tax laws, treaties and
regulations in and between the countries in which we operate. Our income taxes are based upon the
applicable tax laws and tax rates in effect in these countries as well as upon our operating structures in
these countries. Our future effective tax rates could be adversely affected by lower than anticipated
earnings in countries where we have lower statutory rates and higher than anticipated earnings in
countries where we have higher statutory rates, by changes in the valuation of our deferred tax assets
and liabilities or by changes in tax treaties, regulations, accounting principles or interpretations thereof
in one or more countries in which we operate. Further, when operating in the international markets, tax
arising as a result of our income earned in a particular jurisdiction that is not contractually borne by our
customers, is generally taken into account in the pricing of contracts for the employment of our vessels.
If there is any shortfall in our estimation of the taxes payable under such contracts compared with the
actual taxes assessed by the relevant tax authorities, or if the contracts for the employment of our
vessels do not provide for any upward adjustment in prices in the event of higher taxes due to a change
in laws, our profit margins would be adversely affected.

In addition, we are subject to the continuous examination of our income tax returns by relevant tax
authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations
to determine the adequacy of our provision for income taxes. If any tax authority successfully
challenges our operational structure or the taxable presence of our operations in certain countries, or if
the terms of certain income tax treaties are interpreted in a manner that is adverse to our structure, the
effective tax rate on our earnings could increase substantially and our results of operations could be
adversely affected.

Under the Income Tax Act we have opted for all income from our core business operations to be
subject to a special “tonnage tax” regime. The tonnage tax is charged on a notional income calculated

xxx
as per prescribed rates on the net registered tonnage of our vessels multiplied by the number of days the
vessels are in use. Each year, our notional income subject to tonnage tax is significantly lower than our
actual income, resulting in significant savings for us. For instance, in Fiscal Year 2010, our relevant
shipping income was Rs. 279.8 millions as opposed to our actual income of Rs. 2,339.6 millions. In
lieu of opting for the tonnage tax, we have to maintain a tonnage tax reserve that is at least 20% of our
core income which is to be used for acquisition of new vessels within eight years. This ensures that we
keep adding to our tonnage on a regular basis.

In addition to revenues from our core business operations, we earn revenues on certain incidental
business operations such as management of vessels, loading and unloading of cargo and training
activities. We also have certain interest and divided earnings from our joint venture entities. We pay
tax on interest and dividend income and on all income from incidental business operations (less 0.25%
of income from core business operations).

We are also liable to service tax on our operations. Several other countries do not charge such service
tax which renders an advantage to our competitors that are based in such countries.

Seafarers are subject to personal income tax in India unless they lose their tax residency status in India
by virtue of spending significant time outside of the territory of India. Several other countries have
higher thresholds for subjecting their seafarers to taxation and hence our competitors that are based in
such countries have an advantage in attracting and retaining talent.

We have opted for a beneficial tax treatment under the tonnage tax regime of the Income Tax Act.
However, the benefits available under the tonnage tax regime are subject to change. The Direct Tax
Code bill that is pending parliamentary approval recommends changes to the tonnage tax regime that
may result in higher tonnage tax liability for us if approved.

64. Our vessels could be arrested by maritime claimants, which would result in a significant loss of
earnings and cash flow, thereby adversely affecting our financial condition and results of operations.

Under the maritime law of many jurisdictions, claimants for breach of certain maritime contracts,
vessel mortgagees, suppliers of goods and services to a vessel and shippers and consignees of cargo
and others having maritime claims, may arrest a vessel through a court process to obtain security for
their claims. In addition, in certain jurisdictions, a claimant may be able to arrest a “sister ship,” i.e., the
vessels which are owned or controlled by the legal or beneficial owner of that vessel. Besides, in some
jurisdiction, it is also possible to arrest an “associate ship”, which is owned by different legal entities
but having common legal or beneficial control. Our vessels may therefore be arrested with respect to a
claim against the beneficial owner of our vessels. In certain circumstances, claimants may have
maritime liens against our vessels, and such vessels may be arrested even if the claim giving rise to
maritime lien is not against us. Although none of our vessels have been arrested, the arrest of one or
more of our vessels in the future could result in a material loss of earnings and cash flow for us or
require us to provide security to have the arrest lifted. If any of our vessels are arrested over a
prolonged period, we may be required to prepay the loan that we have taken to purchase the affected
vessel which may adversely affect our liquidity and cash flows.

65. The Government could requisition our vessels during a period of war or emergency without
adequate compensation, resulting in loss of earnings and adversely affecting our business, financial
condition and results of operations.

The Government could requisition or seize one or more of our vessels for title or for hire. Requisition
for title occurs when a government takes control of a vessel and becomes its owner. Requisition for
title will have a significant negative effect on us as it will result in loss of title and all revenues from the
requisitioned vessel. In addition, the Government could requisition our vessels for hire. Requisition for
hire occurs when a government takes control of a vessel and effectively becomes its charterer at
dictated charter rates. Generally, requisitions occur during a period of war or emergency. Requisitions
would likely result in reduced income for us. Further, our purchase finance arrangements with our
financiers may impose a prepayment obligation on us if the relevant vessel becomes subject to a
government requisition over a specified period. Therefore, government requisition of one or more of
our vessels may negatively affect our business, financial condition and results of operations.

xxxi
66. Our operations are subject to various state, local and other laws and regulations, including extensive
health, safety and environment (“HSE”) laws and regulations that could require us to make
substantial expenditures and expose us to substantial liability.

We must comply with Indian law and regulations, as well as certain international conventions, the rules
and regulations of certain private industry organisations and agencies, and laws and regulations in
jurisdictions in which our vessels are registered and operate. These regulations govern, among other
things, health and safety of employees, discharges of hazardous substances into the environment, the
removal and clean-up of environmental contamination and the handling and disposal of waste. If we
fail to comply with the requirements of any of these laws or the rules or regulations of these agencies
and organisations, we could be subject to substantial administrative, civil and criminal penalties, the
imposition of remedial obligations, and the issuance of injunctive relief.

Certain HSE laws provide for strict, joint and several liability, without regard to negligence or
contributory fault, for natural resource damages, health and safety remediation, and clean-up costs of
spills and other releases of hazardous substances, and such laws may impose liability for personal
injury or property damage as a result of exposure to hazardous substances. Such HSE laws and
regulations may expose us to liability for the conduct of others.

We cannot assure you that we will be able to comply with such HSE laws in the future. The failure to
comply with such HSE laws or regulations could result in substantial costs and/or liabilities to third
parties or government entities, which could result in an adverse effect on our business, financial
condition, results of operations and prospects.

67. The smuggling of drugs or other contraband onto our vessels may lead to governmental claims
against us.

We expect that our vessels will call in ports where smugglers attempt to hide drugs and other
contraband on vessels, with or without the knowledge of crew members. To the extent our vessels are
found with contraband, whether inside or attached to the hull of our vessel and whether with or without
the knowledge of any of our crew, we may face governmental or other regulatory claims which could
have an adverse effect on our business, financial condition and results of operations.

68. The continuation or recurrence of systemic events such as the recent global economic slowdown,
changes in economic policies and the political situation in India or globally may adversely affect our
performance.

Conditions outside India, such as continued slowdowns in the economic growth of other countries may
adversely impact the growth of the Indian economy, and government policy may change in response to
such conditions. The consequent slowdown in the Indian economy may adversely affect our business,
including our ability to implement our business strategy and increase our activities.

The current economic policies of the Government may change further to respond to the recent global
economic meltdown or a recurrence thereof. Particularly, there may be changes to specific laws and
policies affecting the industry and other policies affecting foreign investment in our business. Any
significant shift or change in India’s economic policies and regulations may disrupt economic
conditions in India and this may in turn affect our business, financial condition and results of
operations.

The Indian financial market and the Indian economy are influenced by economic and market conditions
in other countries. Although economic conditions are different in each country, investors’ reactions to
developments in one country can have adverse effects on the securities of companies in other countries,
including India. Additionally, due to the conditions in the global and domestic financial markets, we
cannot be certain that financing will be available or that we would be able to raise funds, if needed or to
the extent required, or that we will be able to undertake our business without any disruptions and we
may be unable to implement our growth strategy, domestically and internationally. Any recurrence of
such events may have an adverse effect on our business, financial condition and results of operations.

xxxii
69. We are subject to regulatory, economic and political uncertainties in India and a significant change
in the central and state governments’ economic liberalization and deregulation policies could disrupt
our business.

We are incorporated in India, and our operations, assets and personnel are located in India. In recent
years, India has been following a course of economic liberalization and our business could be
significantly influenced by economic policies adopted by the Government. Since 1991, successive
Indian Governments have pursued policies of economic liberalization and financial sector reforms. The
previous coalition-led Government implemented policies and took initiatives that supported the
economic liberalization policies that had been pursued by prior Governments. The Government has at
various times announced its general intention to continue India’s current economic and financial
liberalization and deregulation policies. However, Government corruption and protests against
privatizations, which have occurred in the past, could slow the pace of liberalization and deregulation.
The rate of economic liberalization could change, and specific laws and policies affecting foreign
investment, currency exchange rates and other matters affecting investment in India could change as
well.

The Government and the government of each state of India, have broad powers to affect the Indian
economy and our business. In the past, the Government and state governments have used these powers
to influence, directly and indirectly, Indian import/export trade. Examples of such measures include: (i)
imposing import restrictions and customs duties on imported commodities, in particular on coal, (ii)
granting concessions for operation of new ports, and (iii) allocating Government and state government
funding for infrastructure programs. The Government also provided significant tax incentives and
relaxed certain regulatory restrictions in order to encourage foreign investment in specified industries
of the economy.

A change in the Government’s policies in the future could adversely affect business and economic
conditions in India and could also adversely affect our financial condition and results of operations. A
significant change in India’s economic liberalization and deregulation policies could disrupt business
and economic conditions in India generally, and specifically those of the Company.

70. Terrorist attack, war, natural disaster, an outbreak of an infectious disease or any other serious
public health concerns, or other catastrophic events may disrupt or otherwise adversely affect the
markets in which we operate, our business and operations.

Our business may be adversely affected by war, terrorist attacks, natural disasters, outbreak of
infectious diseases, oil and toxic chemical spills or any other serious public health concerns or other
catastrophes. A catastrophic event could have a direct negative impact on us or an indirect impact on us
by, for example, affecting our customers or the overall economy. In addition, any interruption or
cessation of activities resulting from damage to our customers’ facilities may have an adverse effect on
our business, results of operations, financial condition and cash flow. Such events may have an adverse
effect on the Indian and global financial markets. If India were to become engaged in armed hostilities,
particularly hostilities that were protracted or involved the threat or use of nuclear weapons, our Indian
customers might not be able to continue to operate. As a result, our business, results of operations and
financial condition may be adversely affected.

The occurrence of natural disasters, such as floods caused by unusually heavy rains or tsunamis in or
nearby areas in which we operate, could also adversely affect our business, results of operations and
financial condition. Further, the outbreak of infectious diseases, such as the H5N1 “avian flu” virus, or
H1N1, in Asia or elsewhere or any other serious public health concerns in areas where we or our
customers operate may affect our business. These factors may affect our employees’ living or working
in the affected areas and thus reduce their productivity, resulting in an adverse effect on our business
and operations.

71. The Indian economy has sustained varying levels of inflation in the recent past.

India has experienced fluctuating rates of inflation in the recent past. In the event of an increase in the
rate of inflation, our costs, such as salaries, price of transportation, wages, raw materials or any other of
our expenses may increase. Further, we will not be able to adjust our costs or pass our costs which have
been fixed during periods of lower inflation to our customers. Accordingly, high rates of inflation in

xxxiii
India could increase our costs, could have an adverse effect on our profitability and, if significant, on
our financial condition.

72. Our ability to raise foreign capital may be constrained by Indian law.

As an Indian company, we are subject to exchange controls that regulate borrowing in foreign
currencies. Such regulatory restrictions limit our financing sources for our projects under development
or acquisitions and other strategic transactions, and hence could constrain our ability to obtain
financings on competitive terms and refinance existing indebtedness. In addition, we cannot assure you
that the required approvals will be granted to us without onerous conditions, or at all. Limitations on
foreign debt may have an adverse impact on our business growth, financial condition and results of
operations.

73. Any downgrading of India’s debt rating by an independent agency may harm our ability to raise debt
financing.

Any adverse revisions to India’s credit ratings for domestic and international debt by international
rating agencies may adversely affect our ability to raise additional financing and the interest rates and
other commercial terms at which such additional financing is available. This may have an adverse
effect on our capital expenditure plans, business and financial performance.

74. A decline in India’s foreign exchange reserves may affect liquidity and interest rates in the Indian
economy, which may adversely impact its financial condition.

The Reserve Bank of India’s foreign exchange reserves have declined recently and has negatively
impacted the valuation of the Indian Rupee. Further declines in foreign exchange reserves may
adversely impact the valuation of the Indian Rupee and may result in reduced liquidity and higher
interest rates that may adversely affect our future financial performance and the market price of the
Equity Shares.

75. Significant differences exist between Indian GAAP and other accounting principles, such as US
GAAP and IFRS, which may be material to investors’ assessments of our financial condition.

Our financial statements, including the restated financial statements provided in this Draft Red Herring
Prospectus are prepared in accordance with Indian GAAP. We have not attempted to quantify the
impact of US GAAP or IFRS on the financial data included in this Draft Red Herring Prospectus, nor
do we provide a reconciliation of our financial statements to those of US GAAP or IFRS. Each of US
GAAP and IFRS differs in significant respects from Indian GAAP. Accordingly, the degree to which
the Indian GAAP financial statements included in this Draft Red Herring Prospectus will provide
meaningful information is entirely dependent on the reader’s level of familiarity with Indian accounting
practices. Any reliance by persons not familiar with Indian accounting practices on the financial
disclosures presented in this Draft Red Herring Prospectus should accordingly be limited.

76. Our ability to pay dividends in the future will depend upon our future earnings, financial condition,
cash flows, working capital requirements, capital expenditures and other factors.

The amount of our future dividend payments, if any, will depend upon our future earnings, financial
condition, cash flows, working capital requirements, capital expenditures and other factors. Our ability
to pay dividends may also be restricted under certain financing arrangements that we may enter into.
We may be unable to pay dividends in the near or medium term, and our future dividend policy will
depend on our capital requirements and financing arrangements for our vessels, financial condition,
results of operations and Government policy. There can be no assurance that we shall have
distributable funds in the future.

77. After this Issue, the price of the Equity Shares may be volatile, or an active trading market for the
Equity Shares may not develop.

The trading price of the Equity Shares may fluctuate after this Issue due to a variety of factors,
including our results of operations and the performance of our business, competitive conditions,
general economic, political and social factors, volatility in the Indian and global securities markets, the

xxxiv
performance of the Indian economy and significant developments in India’s the financial year regime.
There can be no assurance that an active trading market for the Equity Shares will develop or be
sustained after this Issue, or that the price at which the Equity Shares are initially offered will
correspond to the prices at which they will trade in the market subsequent to this Issue.

78. You will not be able to sell immediately on an Indian stock exchange any of the Equity Shares you
purchase in the Issue.

The Equity Shares will be listed on the Stock Exchanges and traded on BSE and the NSE. Pursuant to
Indian regulations, certain actions must be completed before the Equity Shares can be listed and trading
may commence. Thereafter, upon receipt of final trading approval from BSE and the NSE, trading in
the Equity Shares is expected to commence within 12 Working Days of the Bid Closing Date. We
cannot assure that the Equity Shares will be credited to investors’ demat accounts, or that trading in the
Equity Shares will commence, within the time periods specified above.

79. Our vessels call on ports located in countries that are subject to restrictions imposed by the U.S.
government and the EU, which could negatively affect investor perceptions of us and impact our
stock market value.

From time to time, vessels in our fleet call on ports located in Sanctions Targets such as Syria and Iran.
In Fiscal Years 2008, 2009 and 2010, vessels in our fleet have made 29 calls to ports in Iran and in
addition, they have made 18 calls to ports in Sudan. On June 30, 2006, Libya was removed from the
U.S. Government's list of state sponsors of terrorism and is not subject to sanctions or embargoes,
while Sudan, Syria and Iran continue to Sanctions Targets and are identified by the U.S. Government
as state sponsors of terrorism. Although these sanctions and embargoes do not prevent our vessels from
making calls to ports in these countries, potential investors could view such port calls negatively, which
could adversely affect our reputation and the market for our common stock. Investor perception of the
value of our common stock may be adversely affected by the consequences of war, the effects of
terrorism, civil unrest and governmental actions in these and surrounding countries.

Certain U.S. state and municipal governments, universities and institutional investors have proposed or
adopted divestment initiatives regarding investments in companies doing business with Iran and other
Sanctions Targets. If our business activities regarding Iran or other Sanctions Targets were deemed to
fall within the scope of such initiatives, then such investors holding interests in us may sell these
interests. If significant, these sales could have adverse effects on our business or the price of our shares.

80. U.S. Person “Facilitation” of the activities of non-U.S. persons that would otherwise be unlawful if
performed by a U.S. person is unlawful under the U.S. Economic Sanctions Laws.

Under the U.S. Economic Sanctions Laws, U.S. persons are generally prohibited from facilitating
activities undertaken by non-U.S. persons, if those activities would be prohibited to the U.S. person.
OFAC has interpreted the term broadly and extended the notion of “facilitation” to any type of activity
that assists a third country entity or person in its business dealings with Sanctions Targets, including
financing that aids that third country entity or person in its activities relating to the Sanction Target.

Prominent Notes:

• Public Issue of 84,690,730 Equity Shares for cash at a price of Rs. [●] per Equity Share of our
Company aggregating Rs. [●]. The Issue comprises a Fresh Issue of 42,345,365 Equity Shares and an
Offer for Sale of 42,345,365 Equity Shares by the Selling Shareholder. The Issue comprises a Net Issue
to the Public of 84,267,276 Equity Shares and a reservation of 423,454 Equity Shares for subscription
by Eligible Employees. The Issue would constitute 18.18% of the post Issue paid-up capital of our
Company. The Net Issue would constitute 18.09% of the post Issue paid-up capital of our Company.

• The net worth of our Company as of March 31, 2010 and June 30, 2010 as per our audited restated
financial statements included in this Draft Red Herring Prospectus was Rs. 63,656 million and Rs.
65,442 million, respectively.

xxxv
• The net asset value per Equity Share as of March 31, 2010 and June 30, 2010 was Rs. 154.54 and Rs.
150.33, respectively, as per our audited restated financial statements included in this Draft Red Herring
Prospectus.

• For details of the related party transactions, see “Related Party Transactions” in section “Financial
Statements” beginning on page 156.

• There has been no financing arrangement whereby our Promoter, the Directors of our Company and
their relatives have financed the purchase by any other person of securities of our Company other than
in the normal course of business of the financing entity during the period from six months immediately
preceding the date of filing of the Draft Red Herring Prospectus with SEBI until date.

• The Investors may contact any of the BRLMs who have submitted the due diligence certificate to
SEBI, for any complaint pertaining to the Issue.

xxxvi
SECTION III - INTRODUCTION
SUMMARY OF INDUSTRY

The shipping industry is fundamental to international trade, being the only practicable and cost effective way
means of transporting large volumes of many essential commodities and finished goods. In 2008, total annual
world seaborne trade amounted to 8.7 billion tonnes of goods (loaded). Dry cargo, including bulk, break bulk
and containerized cargo, accounted for the largest share of goods loaded (66.3%) while oil and related products
made up the balance (Source: International Shipping and World Trade - facts and figures - IMO). The United
Nations Conference on Trade and Development (UNCTAD) estimates that the operation of merchant ships
contributes about US$380 billion in freight rates within the global economy, equivalent to about 5% of total
world trade.).

World Seaborne Trade

Although maritime transport has generally been associated with the carriage of high-volume, low-value goods
such as iron ore and coal, over recent years the share of low-volume, high-value goods such as manufactured
goods carried by sea has been growing. This shift is a function of global and regional GDP growth and a
growing dislocation between the locations of resources, manufacturing bases and key areas of consumption.
World seaborne trade has grown almost continuously since the 1970s. The growth in world seaborne trade is
strongly influenced by any changes in global industrial and economic development trends (Source: Review of
Maritime Transport, 2008, UNCTAD (UNCTAD/RMT/2008)).

During the past three decades, the annual average growth rate of world seaborne trade is estimated to have been
3.1% per annum. At this rate of growth, UNCTAD expects global seaborne trade to increase by 44% in 2020
and double by 2031, potentially reaching 11.5 billion tonnes and 16.04 billion tonnes, respectively (Source:
Review of Maritime Transport, 2008, UNCTAD (UNCTAD/RMT/2008)).

World Seaborne Trade For Selected Years

(Source: Review of Maritime Transport, 2009, UNCTAD (UNCTAD/RMT/2009))

World Merchant Fleet

As of January, 2009, the world merchant shipping fleet reached 1.19 billion DWT in the aggregate, representing
6.7% growth over the last year (Source: Review of Maritime Transport, 2009, UNCTAD (UNCTAD/RMT/2009).
There are four main segments in the shipping industry: bulk carriers, which transport such raw materials as coal
and grain; tankers, which transport such cargo as crude oil, petroleum products and chemicals; container vessels,

37
which transport freight shipped in containers; and gas tankers which transport mostly liquefied petroleum gas
(or “LPG”) and LNG.

Composition of the World Merchant Fleet

General Cargo
9.1%
Container Passenger ships
13.6% 0.5%
Others
LNG 1.0%
Bulk Carriers
3.0%
35.1%
Other
4.1%

Offshore
1.9% Chemical
0.7%

Tankers
35.1%

(Source: Review of Maritime Transport, 2009, UNCTAD (UNCTAD/RMT/2009))

The size of vessels that comprise the world merchant shipping fleet has grown over time. According to
UNCTAD, as of January, 2009, 57.2% of such vessels were more than 20 years old. On the other hand, only
23.8% of vessel tonnage is more than 20 years old. Younger vessels thus contribute more total DWT to the
world merchant shipping fleet (Source: Review of Maritime Transport, 2009, UNCTAD (UNCTAD/RMT/2009).

Age Distribution of World Fleet

0–4 5–9 10–14 15–19 20 years Average


Categories
years years years years and + age
Bulk carriers Ships 16.7 14.9 15.8 10.1 42.5 17.22
dwt 22.9 18.7 17.5 12.1 28.8 14.27
Container ships Ships 31.5 19.5 21.7 11.0 16.4 10.92
dwt 39.8 23.5 17.1 8.6 11.1 9.01
General cargo Ships 9.3 7.8 9.6 11.0 62.3 24.44
dwt 13.7 9.9 12.9 9.4 54.1 22.12
Oil tankers Ships 22.1 14.8 11.1 12.2 39.7 17.55
dwt 29.9 28.3 15.7 13.6 12.6 10.72
Other types Ships 8.2 9.3 9.1 9.5 63.9 25.26
dwt 24.9 15.4 9.6 9.6 40.5 18.24
All ships Ships 11.6 10.4 10.5 10.2 57.2 23.00
dwt 26.9 21.7 15.8 11.7 23.8 13.97
(Source: Review of Maritime Transport, 2009, UNCTAD (UNCTAD/RMT/2009))

The supply of vessels is dependent upon delivery of new vessels and the removal of vessels from the global
fleet, either through scrapping or loss. In general, the prices of new vessels fell considerably during the first
quarter of 2009. The largest price declines were recorded for dry bulk carriers and container ships, while prices
for LNG and LPG tankers remained relatively stable. The most expensive ship continues to be the LNG carrier,
which in April, 2009 cost US$325 million on average (Source: Review of Maritime Transport, 2009, UNCTAD
(UNCTAD/RMT/2009)).

38
New-built prices for ships

Type and size of vessel (USD April


1985 1990 1995 2000 2005 2006 2007 2008
million) 2009
45,000 dwt dry bulk carrier 11 24 25 20 28 31 39 36 29
72,000 dwt dry bulk carrier 14 32 29 23 35 40 54 42 37
170,000 dwt dry bulk carrier 27 45 40 40 59 70 97 89 72
45,000 dwt tanker 18 29 34 29 43 47 52 48 42
110,000 dwt tanker 22 42 43 41 58 81 72 76 65
300,000 dwt tanker 47 90 85 76 120 130 145 151 130
150,000 m3 LNG 200 225 245 165 205 220 220 245 235
78,000 m3 LPG 44 78 68 60 89 92 93 90 85
20,000 dwt general cargo 12 24 21 19 18 24 25 40 30
2,500 TEU full container ship 26 52 50 35 42 46 66 n.a. n.a.
4,000 TEU full container ship n.a. n.a. n.a. n.a. n.a. n.a. 130 70 48
8,000 TEU full container ship n.a. n.a. n.a. n.a. n.a. n.a. 160 130 110
12,500 TEU full container ship n.a. n.a. n.a. n.a. n.a. n.a. n.a. 165 150
(Source: Review of Maritime Transport, 2009, UNCTAD (UNCTAD/RMT/2009))

39
SUMMARY OF OUR BUSINESS

The Company’s ability to successfully implement its business strategy, growth and expansion plans, may be
affected by various factors. Our Company’s business overview, strengths and strategies must be read along with
the “Risk Factors” beginning on page x.

Overview

Our Company was incorporated as Eastern Shipping Corporation Limited on March 24, 1950 under the
Companies Act, 1913 in Mumbai. With effect from October 2, 1961, Western Shipping Corporation Limited
was amalgamated with our Company under the Shipping Corporations Amalgamation Order, 1961, issued by
the Government. The name of our Company was changed from Eastern Shipping Corporation Limited to The
Shipping Corporation of India Limited on October 21, 1961. We are one of India’s largest shipping companies
in terms of Indian flagged tonnage, with approximately a 35% share of Indian flagged tonnage as of June 30,
2010, according to the website of Directorate General of Shipping, Government of India (D.G. Shipping). As of
September 30, 2010, we owned a fleet of 74 vessels of 5.11 million dead weight tonnage (DWT). As of
September 30, 2010, we had ordered the construction of 29 vessels, which we expect to be delivered between
the year ended 2010 and 2013, and we have plans to order an additional 20 vessels in Fiscal Year 2011. In
addition, as of September 30, 2010, we managed 64 vessels of 0.2 million DWT on behalf of Government
agencies, public sector undertakings, and our joint ventures.

Our fleet includes dry bulk carriers, very large crude carrier (VLCC) tankers, crude oil tankers, product tankers,
container vessels, passenger-cum-cargo vessels, phosphoric acid and chemical carriers, LPG and ammonia
carriers, and offshore supply vessels. As of September 30, 2010, our fleet included 18 dry bulk carriers of
781,777 DWT, four VLCCs of 1,274,175 DWT, 17 crude oil tankers of 1,966,317 DWT, 13 product tankers of
730,990 DWT, ten offshore supply vessels of 17,904 DWT, five container vessels of 202,413 DWT, three
phosphoric acid and chemical carriers of 99,174 DWT, two gas carriers of 35,202 DWT, and two passenger-
cum-cargo vessels of 5,303 DWT.

Our customers are primarily comprised of Government agencies, large industrial concerns, international oil
companies and public sector undertakings. We have also entered into six strategic joint ventures which we
believe provide us with various advantages and access to markets we would have otherwise not enjoyed. For
example, we have entered into three joint ventures with Japanese companies to own and operate LNG tanker
vessels.

Our operating income was Rs. 37,390 million, Rs. 41,635 million, Rs. 34,666 million and Rs. 9,129 for Fiscal
Years 2008, 2009, 2010 and the three-month period ended June 30, 2010, respectively. Our adjusted profit was
Rs. 7,546 million, Rs. 9,595 million, Rs. 3,934 million and Rs. 1,787 million for Fiscal Years 2008, 2009, 2010
and the three-month period ended June 30, 2010, respectively. Our income is principally generated from our
bulk carrier and tanker division which contributed 70.5%, 71.7%, 68.5% and 63% of our total income for Fiscal
Years 2008, 2009, 2010 and the three-month period ended June 30, 2010, respectively, and our liner division
which contributed 20.9%, 18.1%, 21.3% and 27.8% of our total income for Fiscal Years 2008, 2009, 2010 and
the three-month period ended June 30, 2010, respectively.

Our business is directly impacted by levels of economic activity in general, and international shipping volumes,
particularly in the energy-related shipping sector. In the twelve months ended December 31, 2009, demand for
shipping services as well as the prices charged by international shipping companies dropped significantly, as the
world economy came under pressure and shipping markets underwent a correction, including the Indian
shipping market. Compared to Fiscal Year 2009, our total income and net profit for Fiscal Year 2010 dropped
by 14.3% and 59%, respectively. According to the International Monetary Fund, since general economic
conditions have improved, the world trade volume is expected to grow at 9% and 6.3% in 2010 and 2011,
respectively. Nevertheless, demand and pricing levels for our services have generally remained well below the
highs reported in previous years.

Our worldwide operations are supported by offices in the four metros of India, namely Mumbai, Delhi, Chennai
and Kolkata and we also have an office in London. As of September 30, 2010, we were further supported by a
network of more than 70 agents worldwide that assist us in our marketing and logistics efforts.

In 1990, we signed our first Memorandum of Understanding with the Government specifying our performance
and operational targets. The Government bestowed the status of “Navratna” on our Company in August 2008

40
leading to enhanced delegation of powers to our Board, including, but not limited to, the areas of capital
investment, formation of joint venture, and opening of new offices. Our performance has been rated “excellent,”
the highest rating, for 18 years pursuant to our Memorandum of Understanding with the Government.

Competitive Strengths

We believe that our future success will be principally attributable to the following competitive strengths:

Established brand name and reputation

We started our operations in 1950 and have been one of India’s leading shipping companies with a long
established reputation and strong customer relationships with various public sector undertakings and the
Government, among others. We have received numerous awards from the Government and the private sector for
excellence in customer satisfaction and operational efficiencies, human resource training, environment
consciousness, safety and emergency preparedness. The Government bestowed the status of “Navratna” on our
Company in August 2008. See the section below titled “Awards” for the list of additional awards received by
our Company. We intend to continue to leverage the goodwill of our brand to enhance our relationships with
existing customers and to seek new customers to help us grow our business. We believe that our strong brand
name and the reputation that our Company has built over the last five decades provides us with access to
opportunities to bid for large contracts for our services.

Diversified fleet

We own a variety of modern and technologically-advanced vessels including bulk carriers, VLCCs, crude oil
tankers, product tankers, container vessels, passenger-cum-cargo vessels, phosphoric acid and chemical carriers,
LPG and ammonia carriers and offshore supply vessels. This fleet diversification allows us to enter into
chartering arrangements of varying duration with different types of customers. We believe that our existing fleet
as well as next generation of fleet will have better functional capabilities and operate more efficiently than
equivalent older vessels thereby allowing us to provide improved services to our customers.

Experienced management team

We are led by an experienced and qualified management team with a proven track record of success and
knowledge of the Indian and international shipping industry. Many of our senior managers are former sailors
and captains with years of operational experience. We believe that our management’s expertise in managing
growth, diversifying our fleet and implementing our strategies provides us with significant competitive
advantages.

Well-positioned to grow our fleet size to take advantage of India’s growth

As one of India’s oldest, largest and reputable shipping companies, we are well-positioned to take advantage of
expected future growth in the Indian economy. Since 1961, we have grown our fleet from 19 vessels of 0.19
million DWT to 74 vessels of 5.11 million DWT as of September 30, 2010. We believe that our ability to grow
our fleet size positions us well to take advantage of attractive asset prices and anticipated growth in the shipping
industry as the Indian economy and its ties to international markets grows. The GDP of India grew from
US$837.0 billion to US$1,310.0 billion from the period of 2005 to 2010 representing a growth of 56.5%,
according to the World Bank. Due to our fleet’s ability to provide services to all major ports on the east and
west coast of India, we believe that we are well-positioned to reap the benefits of expected future growth in the
Indian economy.

Strong balance-sheet

As of June 30, 2010, we had Rs. 22,115 million cash and cash equivalents on our balance sheet with a debt to
equity ratio of 0.45 and a current ratio of 2.97. We believe that our strong balance sheet and cash on hand
provides us with greater working capital and the flexibility to sustain our business during difficult economic
times. In addition, our strong balance sheet has allowed us to service interest and principal payments on our debt
in a timely manner. We believe that our strong balance sheet and history of timely loan payments permit us to
enter into favorable financing terms for the acquisition of vessels.

41
Strategic joint ventures

We have entered into six strategic joint ventures which we believe provide us with various advantages and
access to markets we would have otherwise not enjoyed. Through these joint ventures, we strengthen our ties
with our joint venture partners who are also our charterers. These joint ventures add value to our business. We
believe that we are the first Indian shipping company to participate in the transportation of LNG. We have
partnered with three Japanese shipping companies to own and operate three LNG tankers and we have taken
over the operation and management of two LNG tankers. In addition, we have formed a joint venture with
Forbes Gokak Limited and Sterling Investment Corporation Private Limited for the purpose of entering into the
chemical tanker segment. Our joint venture with the Steel Authority of India Limited (SAIL) will pay us on a
cost plus basis and provides us with certainty of cash flows on a long-term basis and provides a benefit in times
of difficult market conditions. We believe that these joint ventures and those we enter into in the future will
provide us with economic and strategic benefits.

Preferred Indian shipping company with the largest all-India flagged fleet

We own the largest fleet in terms of tonnage under the Indian flag, according to D.G. Shipping. All of our
owned vessels are Indian flagged vessels. This fact has in the past provided us with certain advantages in
capturing domestic contracts including those from the Government, especially due to cabotage laws. See the
“Regulatory Matters” on page 110 for discussion regarding the cabotage laws. In addition, because of our long
standing history, the Government and public sector companies look to us for their shipping requirements,
including transport services for certain sensitive sectors such as oil and gas. In addition, in obtaining Indian
shipping customers, we believe that we have a competitive advantage over foreign vessels that have to obtain
certain certifications under Indian cabotage laws.

Our Business Strategy

Our objective is to maintain our dominant market position in the Indian shipping industry with a focus on high
growth segments. We intend to achieve our objectives through implementation of the following strategies:

Continue to focus on energy-related transportation

The market for energy-related transportation provides opportunities for significant growth. We believe that our
tanker division will continue to benefit from growth in India’s oil refining industry, which requires increased
crude oil imports and refined oil exports, and that our bulk carrier division will benefit from growth in India’s
domestic power and steel industries, both of which are expected to increase the country’s coal imports.
According to the Government Planning Commission, the annual growth rate in India’s demand for coal and
production of coal, during the Government’s 11th five year plan is projected at 9% and 7.9%, respectively. We
intend to take advantage of these growth opportunities by employing our vessels for the transportation of coal
and oil. We intend to increase our participation in these markets through direct capital investment and by
entering into strategic alliances with established and significant industry participants.

Improve and optimize our fleet mix through acquiring newly built vessels

The total Indian shipping fleet has not grown in tandem with the overall growth of the Indian seaborne trade
thereby creating opportunities to meet unmet demand. According to the Indian National Shipowners Association
(INSA), during the period from 1999 to 2008 total Indian shipping tonnage increased by 37% while the share of
Indian shipping tonnage in Indian overseas trade decreased from 31.5% to 9.5%. We believe that we can capture
additional market share in India and worldwide through investments in additional vessels. As of September 30,
2010, we had 29 vessels on order to be delivered over the course of the next three years. These vessels include
Aframax tankers and long range tankers, AHTVS vessels, platform supply vessels, Handymax bulk carriers,
Panamax bulk carries and Kamsamax bulk carriers. The additional vessels we have on order are expected to
allow us to increase our total DWT from 5.11 million to 6.84 million.

Apart from the existing vessels on order, we currently have plans to order an additional 20 vessels in Fiscal Year
2011. These new vessels will lower the average age of our fleet, and we believe, thereby reduce our operating
costs. Investments in additional vessels will also allow us to bid on additional charters worldwide thereby
increasing our market share and further diversifying our sources of income. See the section below titled “Fleet
on Order”.

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Improve our operating efficiency, quality of service and overall competitiveness

We believe that our customers place high value on our efficiency, high quality of service and responsiveness
under varying market conditions. We intend to improve our operating efficiency and the capacity of our fleet by
(i) ordering the construction of new vessels, thereby reducing the average age of our fleet, (ii) implementing a
new information technology system that will integrate our operations across divisions and connect us to our
network of agents worldwide, thereby increasing efficiency in the areas of booking, scheduling and tracking of
our vessels, and (iii) increasing the scope of our logistics capabilities, so as to provide our clients with door to
door solutions, in connection with our container and break-bulk services.

Leverage strong relationships with customers

We intend to further strengthen our relationships with customers by striving to meet or exceed their business
needs. As a major portion of our income is generated from repeat clients, we intend to leverage our existing
relationships with these customers to expand our business. We will continue to explore and evaluate measures to
integrate our shipping activities with the overall maritime and logistic requirements of our customers with a
view to providing efficient and economical, maritime and logistical solutions to the end users.

Maintain diversity in contracts and customers

We will continue to employ our bulk and tanker vessels as well as our containerships to a large number of
companies and Government organizations under short, medium and long-term charters and contracts of
afreightment (COAs) in order to maintain a highly diverse portfolio of customers and charters. Our contracts
have terms that range from twenty days to three years and our customers are geographically diverse with
headquarters and operations based throughout the world. We believe that our strategy minimizes our exposure to
any one customer and allows us to employ our vessels during any particular period in the charter market cycle.
See the section below titled “Chartering”.

Identify and pursue additional strategic alliances

We intend to partner with companies that we believe will enhance our business, fleet or profitability when
suitable opportunities arise. We intend to focus on entering into consortia arrangements in the container segment
and to pursue highly capital intensive segments, such as LNG transportation. The joint ventures we have
currently formed also provide us access to markets that we may otherwise not enjoy. For example, through our
joint ventures we acquired access to the LNG transportation segment, which we previously had not pursued. We
may execute strategic alliances to expand our service offerings and fleet size in India or worldwide.

Expand and further develop our container and break-bulk services

We intend to further expand and develop our container services, as we believe that this is an area of potential
income growth in the future. As part of our service routes, we plan to extend our reach into Southeast Asia,
Southern Africa and North America. We are also reviewing ways in which we can connect our services to ports
in East Africa as we believe that India is emerging as the biggest exporter of goods and project cargo to this
region. We also intend to recommence our India-U.S. containership service in the future.

We intend to continue to further expand and develop our break-bulk business by entering into new joint service
agreements with vessel owners to operate in trade lanes that we believe present areas for diversification and
growth such as Europe to the Middle East, the East Coast of the U.S. to Europe and Southeast to Far East Asia.
We intend to enter into joint ventures with reputable logistics providers for end to end logistical operations for
projects in the area of power, oil and gas and infrastructure.

43
THE ISSUE

Issue (1) 84,690,730 Equity Shares


Of which
Fresh Issue 42,345,365 Equity Shares
Offer for Sale 42,345,365 Equity Shares

Of which
Employee Reservation Portion(3) 423,454 Equity Shares

Therefore,

Net Issue to the Public 84,267,276 Equity Shares


Of which
A) QIB Portion(2) Up to 42,133,638 Equity Shares
Anchor Investor Portion Up to 12,640,091 Equity Shares i.e. up to 30% of QIB
Portion
Balance available for allocation to QIBs other than the Anchor 29,493,547 Equity Shares
Investors (assuming the Anchor Investor Portion is fully
subscribed)
Of which
Available for allocation to Mutual Funds only 1,474,678 Equity Shares
Balance for all QIBs including Mutual Funds 28,018,869 Equity Shares

B) Non-Institutional Portion Not less than 12,640,091 Equity Shares (3)

C) Retail Portion Not less than 29,493,547 Equity Shares (3)

Equity Shares outstanding prior to the Issue 423,453,645 Equity Shares

Equity Shares outstanding after the Issue(4) 465,799,010 Equity Shares

Use of Issue Proceeds See “Objects of the Issue” beginning on page 67

(1) The Ministry of Shipping, Government of India has through its letter (no. SS-11036/37/2009-SY-II)) dated October 11, 2010 has granted
approval for the Issue. The Issue has been authorized by the Board of Directors pursuant to a board resolution dated August 11, 2010
and by the shareholders of our Company pursuant to a special resolution dated September 29, 2010 passed at the annual general
meeting of shareholders under section 81(1A) of the Companies Act.

(2) Our Company and the Selling Shareholder, in consultation with the BRLMs may allocate up to 30% of the QIB Portion, to Anchor
Investors on a discretionary basis in accordance with the SEBI Regulations. One third of the Anchor Investor Portion shall be reserved
for domestic Mutual Funds, subject to valid Bids being received from domestic Mutual Funds at or above the price at which allocation
is being done to Anchor Investors. For further details see “Issue Procedure” beginning on page 254. Except with respect to the Anchor
Investor Portion, allocation shall be made on a proportionate basis.

(3) In case of under-subscription in the reserved category portion to the public category, spill-over to the extent of under-subscription shall
be permitted from the reserved category to the Net Issue to the public. Under subscription in any other category, if any, would be
allowed to be met with spill-over from other categories or combination of categories at the discretion of our Company and the Selling
Shareholder, in consultation with the BRLMs and the Designated Stock Exchange.

For details of the terms of the Issue, see “Terms of the Issue” beginning on page 247.

44
SELECTED FINANCIAL INFORMATION

The following tables set forth summary financial information derived from our restated financial statements for
the three month period ending June 30, 2010 and fiscal years ending March 31, 2010, March 31, 2009, March
31, 2008, March 31, 2007 and March 31, 2006. These financial statements have been prepared in accordance
with Indian GAAP, the Companies Act and the SEBI Regulations and are presented in “Financial Statements”
beginning on page 156. The summary financial information presented below should be read in conjunction with
our restated financial statements, the notes thereto and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” beginning on page 198.

RESTATED SUMMARY STATEMENT OF ASSETS AND LIABILITIES

(Rs. in Million)
AS AT 30th June 31st 31st 31st 31st 31st
2010 March March March March March
2010 2009 2008 2007 2006

A. FIXED ASSETS
Gross Block 88,211 88,932 81,618 66,943 67,054 68,189
Less : Depreciation 43,427 43,786 43,248 40,351 37,324 35,590

Net Block 44,784 45,146 38,370 26,592 29,730 32,599


Assets under Construction 23,228 18,547 20,999 20,072 7,625 2,373
Assets held for Disposal * * * * - -

Total Fixed Assets 68,012 63,693 59,369 46,664 37,355 34,972

B. INVESTMENTS 1,799 1,667 1,115 415 240 90

C. CURRENT ASSETS,
LOANS & ADVANCES
Inventories 660 832 633 900 738 703
Sundry Debtors 4,377 3,437 4,371 3,983 3,452 3,853
Cash & Bank Balances 22,115 24,065 26,728 20,912 26,247 20,973
Deposit with Public 2,975 2,700 1,600 1,650 - 1,500
Financial Institutions
Other Current Assets 1,245 1,391 1,018 939 1,096 829
Amounts advanced to Joint 2,397 2,348 2,635 2,659 3,143 2,189
Venture Companies
Loans and Advances 3,587 3,199 3,314 2,949 3,261 4,778

Total Current Assets 37,356 37,972 40,299 33,992 37,937 34,825

LIABILITIES &
PROVISIONS

D. LOAN FUNDS
Secured Loans 29,158 26,969 24,717 14,542 12,447 13,744

E. CURRENT LIABILITIES
& PROVISIONS
Sundry Creditors & Other 9,135 9,301 9,792 8,687 11,325 10,542
Liabilities
Provisions 3,432 3,406 4,068 1,999 648 1,907

Total Current Liabilities 12,567 12,707 13,860 10,686 11,973 12,449


& Provisions

45
AS AT 30th June 31st 31st 31st 31st 31st
2010 March March March March March
2010 2009 2008 2007 2006
F. NET WORTH 65,442 63,656 62,206 55,843 51,112 43,694

Represented by:
Share Capital 4,235 4,235 4,235 2,823 2,823 2,823
Reserves & Surplus 61,207 59,421 57,971 53,020 48,289 40,871

Net Worth 65,442 63,656 62,206 55,843 51,112 43,694

* (Rs.0.2 Millions)

46
RESTATED SUMMARY STATEMENT OF PROFIT AND LOSS ACCOUNT

Rs. in Million
Period / Year ended on 30th 31st 31st 31st 31st 31st
June March March March March March
2010 2010 2009 2008 2007 2006
A. INCOME
Operating Earnings 9,129 34,666 41,635 37,390 37,176 36,137
Profit on sale of Ships (Net) 155 1,225 345 - 827 121
Interest Income 426 2,182 2,727 2,277 2,197 1,726
Other Income 179 327 769 73 227 248
Excess provision/Sundry credit 62 662 102 578 1,582 244
balances written back
Total 9,951 39,062 45,578 40,318 42,009 38,476
B. EXPENDITURE
Operating Expenses 6,275 27,646 28,103 25,939 25,601 21,386
Administration Expenses 531 1,989 2,050 1,824 1,352 1,262
Other Expenses, Provisions etc. 29 161 538 335 220 110
Interest 123 525 647 609 801 791
Depreciation 1,016 3,814 3,252 3,028 2,916 3,036
Total 7,974 34,135 34,590 31,735 30,890 26,585
C. PROFIT BEFORE 1,977 4,927 10,988 8,583 11,119 11,891
EXTRAORDINARY ITEMS
D. EXTRAORDINARY ITEMS:
Less : Provision towards loss of Ship - - 214 - - -
/ other incidental charges
Less : Provision towards NYSA - - 39 138 - -
USA pension liability due to exit
from IDX Service
E. PROFIT BEFORE TAX 1,977 4,927 10,735 8,445 11,119 11,891
Provision for Indian Income Tax
- Current 190 993 1,100 860 929 695
- Fringe Benefit Tax - - 40 39 29 30
F. PROFIT AFTER TAX 1,787 3,934 9,595 7,546 10,161 11,166
Less: Transferred to Tonnage Tax - 800 2,000 1,700 2,250 3,000
Reserve u/s 115VT of Income Tax
Act
G. BALANCE 1,787 3,134 7,595 5,846 7,911 8,166
Add : Balance brought forward from 5,034 4,817 4,119 5,915 4,970 3,548
last year
H. AMOUNT AVAILABLE FOR 6,821 7,951 11,714 11,761 12,881 11,714
APPROPRIATION
Appropriations
Staff Welfare Fund - 10 8 7 6 6
Corporate Social Responsibility - 38 94 - - -
Reserve
Capital Reserve - - 75 28 223 1
General Reserve - 400 3,500 4,800 4,000 4,000
Interim Dividend - - - 1,270 2,400 2,400
Tax on Interim Dividend - - - 216 337 337
Proposed Dividend - 2,117 2,752 1,129 - -
Tax on Proposed Dividend - 352 468 192 - -
I. BALANCE CARRIED TO 6,821 5,034 4,817 4,119 5,915 4,970
BALANCE SHEET

47
RESTATED CASH FLOW STATEMENT

(Rs. in Millions)
Period / year 30.06.2010 31.03.2010 31.03.2009 31.03.2008 31.03.2007 31.03.2006
ended
(A) CASH FLOW
FROM
OPERATING
ACTIVITIES
Net profit before 1,977 4,927 10,735 8,445 11,119 11,891
Tax
ADJUSTMENTS
FOR :
Depreciation 1,016 3,814 3,252 3,028 2,916 3,036
Interest Income (426) (2,182) (2,727) (2,277) (2,197) (1,726)
Interest paid 123 525 647 609 801 791
Dividend 0 (23) (21) (19) (93) (20)
Received
Surplus on sale of 0 0 (2) (35) (1) (3)
Fixed Assets
(other than ships)
Surplus on Sale of (155) (1,225) (345) 0 (827) (121)
Ships
Provision for 0 27 449 66 18 (42)
doubtful debts &
Advances (Net)
Debts & Advances 0 1 0 177 1 1
written off
Sundry credit (4) (33) (17) (259) (596) (5)
balances written
back
554 904 1,236 1,290 22 1,901
Operating profit 2,531 5,831 11,971 9,735 11,141 13,802
before working
capital changes
Adjustments for :
Increase in
working capital
(a) Trade & other (850) 797 (1,339) (202) 2,155 (1,409)
receivables
(b) Inventories 172 (199) 267 (162) (36) (198)
(c) Trade payables (135) (195) 1,223 120 (2,558) (1,645)
(a)+(b)+(c) (813) 403 151 (244) (439) (3,252)
Cash generated 1,718 6,234 12,122 9,491 10,702 10,550
from operations
Tax paid (Net of (182) (1,004) (1,070) (1,022) (1,151) (360)
Refunds)
Net Cash From (A) 1,536 5,230 11,052 8,469 9,551 10,190
Operating
Activities
(B) CASH FLOW
FROM
INVESTING
ACTIVITIES
Purchase / (5,336) (8,140) (15,940) (12,339) (5,314) (4,432)
Acquisition of
Fixed Assets
(including Assets

48
Period / year 30.06.2010 31.03.2010 31.03.2009 31.03.2008 31.03.2007 31.03.2006
ended
under
construction)
Investment with (275) (1,100) 0 (1,650) 0 (1,500)
Public Financial
Institutions
Receipts from 0 0 50 0 1,500 0
Maturity of
Investments
Sale of Fixed 156 1,227 329 37 841 136
Assets
Income from 39 190 199 199 299 357
Investments
Interest Received 258 1,936 2,431 2,132 1,902 1,378
Sale / Purchase of (133) (552) (700) (175) (150) (75)
Investments
Advances to Joint (266) 229 71 417 (925) (157)
Venture
Companies
Net cash used in (B) (5,557) (6,210) (13,560) (11,379) (1,847) (4,293)
investing activities
C) CASH FLOW
FROM
FINANCING
ACTIVITIES
Loans Borrowed 2,190 2,252 10,175 2,095 (1,297) (283)
(Net of
Repayments)
Dividends Paid 0 (3,219) (1,323) (3,884) (338) (2,734)
(Incl. Dividend
Tax)
Interest Charges (117) (701) (516) (628) (789) (758)
Staff Welfare (1) (8) (12) (8) (6) (6)
Activities (Net)
Corporate Social (1) (7) 0 0 0 0
Responsibility
Activities
Net cash flow (C) 2,071 (1,683) 8,324 (2,425) (2,430) (3,781)
from financing
activities
NET INCREASE (A+ (1,950) (2,663) 5,816 (5,335) 5,274 2,116
/ (DECREASE) B+C
IN CASH & )
CASH
EQUIVALENTS
Cash & cash 24,065 26,728 20,912 26,247 20,973 18,857
equivalents at the
Beginning of the
Year
Cash & cash 22,115 24,065 26,728 20,912 26,247 20,973
equivalents at the
end of the Year.

49
GENERAL INFORMATION

Registered Office and registration number of our Company


Shipping House
245, Madame Cama Road
Mumbai 400 021
Tel: (91 22) 2202 6666
Fax: (91 22) 2202 6906
Website: www.shipindia.com
CIN: 63030MH1950GOI008033

Address of Registrar of Companies

Our Company is registered with the Registrar of Companies, Maharashtra, situated at the following address:

Registrar of Companies
Everest, 5th Floor
100 Marine Drive
Mumbai 400 002
Maharashtra

Board of Directors

The Board of Directors consists of:

Name of the Designation DIN Address


Director
S. Hajara Chairman & Managing Director 00004485 5/A "Lands End", 29/D Dongersi Road,
Whole-time Director Malabar Hill, Mumbai 400 006
Vijay Chhibber (Official part-time) Director 00396838 D-1/174, Satya Marg
nominated by the Government New Delhi 110 021
Rajeev Gupta (Official part-time) Director 01980381 23, Dayanand Vihar
nominated by the Government Vikas Marg, New Delhi 110 092
J. N. Das Director (Liner & Passenger 00450563 Flat No. 13, 1st Floor, Chitrakoot
Service) Cooperative Housing Society,
Whole-time Director Altamount Road,
Mumbai 400 026
Rear Admiral (Retd.) Non Official Part-time 00409241 526, Jalvayu Towers
T. S. Ganeshan (Independent) Director NGEF Layout, Sadananda Nagar
Bangalore 560 038
Kailash Gupta Director (Personnel & 00547007 11B, Anita CHS, Mount Pleasant Road,
Administration) Malabar Hill, Mumbai 400 006
Whole-time Director
Sushil Khanna Non Official Part-time 00115364 218 B, Lake Terrace Extension
(Independent) Director Second floor
Kolkata 700 029
B. K. Mandal Director (Finance) 00003904 151, Jolly Makers Apartment No. 3
Whole-time Director Varuna Premises CHS Limited
119, Cuffe Parade, Colaba
Mumbai 400 005
Nasser Munjee Non Official Part-time 00010180 Benedict Villa, House No. 471
(Independent) Director Saud Vaddo
Chorao Island, Tiswadi
Goa 403 102
Capt. K. S. Nair Director (Bulk Carrier & 02437184 A/21, Twin Towers, off Veer Savarkar
Tanker) Marg, Prahadevi
Whole-time Director Mumbai 400 025
Arun Ramanathan Non Official Part-time 00308848 6A, 6 West Cross Street

50
Name of the Designation DIN Address
Director
(Independent) Director Shenoy Nagar
Chennai 600 030
U. Sundararajan Non Official Part-time 00001533 1302, 13th floor, Whispering Palms,
(Independent) Director Building No.3,
Lokhandwala Township
Akurli Road, Kandivli (East)
Mumbai 400 101
S. C. Tripathi Non Official Part-time 00941922 No. 27, Sector 15A
(Independent) Director Noida
Uttar Pradesh 201 301
Arun Kumar Verma Non Official Part-time 03220124 A-14, Shahid Nagar
(Independent) Director Bhubaneshwar 751 007

For further details of the Directors, see “Management” beginning on page 131.

Company Secretary and Compliance Officer

Dipankar Haldar
Sr.Vice President (Legal Affairs) & Company Secretary
Shipping House
245, Madame Cama Road
Mumbai 400 021
Tel: (91 22) 2202 6666
Fax: (91 22) 2202 6906
Email: cs@sci.co.in

Investors can contact the Compliance Officer or the Registrar to the Issue in case of any pre-Issue or
post-Issue related problems, such as non-receipt of letters of Allotment, credit of Allotted shares in the
respective beneficiary account and refund orders.

Book Running Lead Managers

SBI Capital Markets Limited IDFC Capital Limited


202, Maker Tower ‘E’ Naman Chambers, C-32
Cuffe Parade G-Block, Bandra Kurla Complex
Mumbai 400 005 Bandra (East)
Tel: (91 22) 2217 8300 Mumbai 400 051
Fax: (91 22) 2218 8332 Tel: (91 22) 6622 2600
E-mail: scifpo@sbicaps.com Fax: (91 22) 6622 2501
Investor Grievance Email: Email: sci.fpo@idfc.com
investor.relations@sbicaps.com Investor Grievance Email: complaints@idfc.com
Website: www.sbicaps.com Website: www.idfccapital.com
Contact Person: Rochelle Dsouza/Anshika Malaviya Contact Person: Hiren Raipancholia
SEBI Registration No.: INM000003531 SEBI Registration No.: INM000011336

ICICI Securities Limited


ICICI Centre
H. T. Parekh Marg
Churchgate
Mumbai 400 020
Tel: (91 22) 2288 2460
Fax: (91 22) 2282 6580
Email: sci.fpo@icicisecurities.com
Investor Grievance Email: customercare@icicisecurities.com
Website: www.icicisecurities.com
Contact Person: Rajiv Poddar
SEBI Registration No.: INM000011179

51
Legal Counsels

Domestic Legal Counsel to the Issue International Legal Counsel to the Issue

Amarchand & Mangaldas & Suresh A. Shroff & O’Melveny & Myers LLP
Co.
5th Floor, Peninsula Chambers 9 Raffles Place
Peninsula Corporate Park #22-01/02 Republic Plaza 1
Ganpatrao Kadam Marg, Singapore 048619
Lower Parel Tel: (65) 6593 1800
Mumbai 400 013 Fax: (65) 6593 1801
Tel: (91 22) 2496 4455
Fax: (91 22) 2496 3666

Syndicate Members

[●]

Auditors to our Company

P.S.D. & Associates, Chartered Accountants Sarda & Pareek, Chartered Accountants
324, 3rd Floor Mahavir Apartments, 3rd Floor
Ganpati Plaza, M.I. Road 598, M.G. Road, Near Suncity Cinema
Jaipur 302 001 Vile Parle (East)
Tel: (91 141) 2389 181 Mumbai 400 057
Fax: (91 141) 2389 180 Tel: (91 22) 2610 1124
Email: prakash_psd@rediffmail.com Fax: (91 22) 2613 4015
Membership no. of Prakash Sharma: 072332 Email: nvjca@sardapareek.com
Membership no. of Niranjan Joshi: 102789

Registrar to the Issue

Karvy Computershare Private Limited


Plot no. 17 to 24, Vithalrao Nagar
Madhapur
Hyderabad 500 081
Tel: (91 40) 4465 5000
Fax: (91 40) 2343 1551
Email: sci.fpo@karvy.com
Website: http:\\karisma.karvy.com
Contact Person: M. Murali Krishna
SEBI Registration No.: INR000000221

Issue Grading

Grading of the Issue is not required as it is a further public offering.

Expert Opinion

Our Company has received consent from the Statutory Auditors namely, P.S.D & Associates, Chartered
Accountants, and Sarda & Pareek, Chartered Accountants to include their names as an expert in this Draft Red
Herring Prospectus in relation to the report of the auditors dated October 11, 2010 and statement of tax benefits
dated October 11, 2010 in the form and context in which it appears in this Draft Red Herring Prospectus.

Bankers to the Issue and Escrow Collection Banks

[●]

52
Bankers to our Company

State Bank of India HDFC Bank Limited


Overseas branch 1201 Raheja Centre
World Trade Centre Free Press Journal Marg
Post Box No. 16094 Nariman Point
Cuff Parade Mumbai 400 021
Mumbai 400 005 Tel: (91 22) 3023 3255
Tel: (91 22) 2218 9161 Fax: (91 22) 2204 9750
Fax: (91 22) 2218 1518 E-mail: gayatri.rao@hdfcbank.com
E-mail:sbi.04791@sbi.co.in Website: www.hdfcbank.com
Website: www.statebankofindia.com Contact Person: Gayatri Rao
Contact Person: Ravi Ranjan

Bank of Maharashtra Indian Bank


Nariman Point Branch Nariman Point Branch
Mittal Chambers 210 Mittal Tower
Nariman Point Nariman Point
Mumbai 400 021 Mumbai 400 021
Tel: (91 22) 2281 8864 Tel: (91 22) 2284 0708
Fax: (91 22) 2204 9953 Fax: (91 22) 2204 5290
E-mail: bom671@mahabank.co.in E-mail: narimanpoint@indianbank.co.in
Website:www.mahabank.com Website: www.indianbank.in
Contact Person: R.C. Mishra Contact Person: G.V. Balsubramanian

Oriental Bank of Commerce Syndicate Bank


Large Corporate Branch Nariman Point Branch
181-A, Maker Tower ‘E’ 227, Nariman Bhavan
Cuff Parade, Nariman Point
Mumbai 400 005 Mumbai 400 021
Tel: (91 22) 2215 4656 Tel: (91 22) 2284 2865
Fax: (91 22) 2215 3533 Fax: (91 22) 2202 4812
E-mail: bm0902@obc.co.in E-mail: mh.5037mumnp@syndicatebank.co.in
Website: www.obcindia.co.in Website: www.syndicatebank.com
Contact Person: K.K. Acharya Contact Person: Bhaskar Hande

The Bank of Nova Scotia The Hongkong and Shanghai Banking Corporation
Mittal Tower, ‘B’ Wing Limited
Nariman Point 16 Veer Nariman Road
Mumbai 400 021 Fort
Tel: (91 22) 6636 4251 Mumbai 400 001
Fax: (91 22) 2287 3125 Tel: (91 22) 2268 1020
E-mail: s.ravindran@scotiabank.com Fax: (91 22) 6653 6014
Website: www.scotiabank .com E-mail: piyushagarwal@hsbc.co.in
Contact Person: S.Ravindran Website: www.hsbc.co.in
Contact Person: Piyush Agarwal

Citibank
Citigroup Centre,
Bandra Kurla Complex, G Block,
Bandra East,
Mumbai 400 051
Tel: (91 22) 40015256
Fax: (91 22) 26535824
E-mail: sachin.bafna@citi.com
Website:www.citibank.com
Contact Person: Sachin Bafna

53
Self Certified Syndicate Banks

The list of banks that have been notified by SEBI to act as a SCSB for the ASBA process are provided on
www.sebi.gov.in. For details on Designated Branches of SCSBs collecting the ASBA Bid Cum Application
Forms, please refer to the above mentioned link.

Monitoring Agency

Our Company has appointed [●] as the monitoring agency pursuant to the agreement dated [●]. Our Company
will appoint a Monitoring Agency prior to filing the Red Herring Prospectus with SEBI in accordance with
SEBI Regulations.

Inter Se Allocation of Responsibilities between the BRLMs

The following table sets forth the inter se allocation of responsibilities for various activities among the BRLMs
for the Issue:

Designated
S. Coordinating Book
Activity Responsibility
No. Running lead
Manager
Capital structuring with relative components and formalities such SBI Caps, IDFC, SBI Caps
1.
as type of instruments., etc. I-Sec
Due-diligence of our Company including operations/management/ SBI Caps, IDFC, SBI Caps
business plans/legal, etc. drafting and design of this Draft Red I-Sec
Herring Prospectus including the memorandum containing salient
2. features of the Prospectus. The Book Running Lead Managers shall
ensure compliance with stipulated requirements and completion of
prescribed formalities with the Stock Exchanges, the RoC and
SEBI, including finalization of Prospectus and the RoC filing
Drafting and approving all statutory advertisements, non-statutory SBI Caps, IDFC, Statutory Ads - SBI
advertisements including corporate advertisements I-Sec Caps
3.
Non Statutory Ads –
IDFC
Appointment of Printer(s) SBI Caps, IDFC, SBI Caps
4.
I-Sec
Appointment of Registrar to the Issue SBI Caps, IDFC, I-Sec
5.
I-Sec
Appointment of Advertising Agency SBI Caps, IDFC, IDFC
6.
I-Sec
Appointment of Bankers to the Issue SBI Caps, IDFC, IDFC
7.
I-Sec
Preparation and finalization of the road-show presentation and SBI Caps, IDFC, IDFC
8.
frequently asked questions for the road-show team I-Sec
International and domestic institutional marketing of the Issue, SBI Caps, IDFC, IDFC
which will cover, inter alia, I-Sec
• Institutional marketing strategy
9. • Finalizing the list and division of investors for one to one
meetings, and
• Finalizing road show schedule and investor meeting
schedules
Non-institutional and retail marketing of the Issue, which will SBI Caps, IDFC, IDFC
cover, inter alia, I-Sec
• Formulating marketing strategies, preparation of publicity
budget
10.
• Finalizing media and public relations strategy
• Finalizing centers for holding conferences for brokers, etc.
• Follow-up on distribution of publicity and Issue material
including application form, Prospectus and deciding on the

54
Designated
S. Coordinating Book
Activity Responsibility
No. Running lead
Manager
quantum of the Issue material
• Finalizing collection centers
Co-ordination with Stock Exchanges for Book Building Process SBI Caps, IDFC, I-Sec
11.
software, bidding terminals and mock trading I-Sec
Managing the book and finalization of pricing in consultation with SBI Caps, IDFC, I-Sec
12.
our Company and the Selling Shareholder I-Sec
Post bidding activities including essential follow-up steps with SBI Caps, IDFC, I-Sec
Bankers to the Issue and Self Certified Syndicate Bank to get quick I-Sec
estimates of collection and advising the issuer about the closure of
issue, management of escrow accounts, co-ordination of allocation,
finalization of basis of Allotment / weeding out of multiple
applications, intimation of allocation and dispatch of certificates or
demat credit and refunds to bidders, dealing with the various
13.
agencies connected with the work such as Registrars to the Issue,
Bankers to the Issue, Self Certified Syndicate Banks and the bank
handling refund business, listing of the Equity Shares etc. The
designated coordinating Book Running Lead Manager shall be
responsible for ensuring that the intermediaries fulfill their
functions and enable him to discharge this responsibility through
suitable agreements with our Company and the Selling Shareholder.

Credit Rating

As the Issue is of Equity Shares, there is no credit rating for this Issue.

Trustees

As the Issue is of Equity Shares, the appointment of trustees is not required.

Book Building Process

Book Building Process, with reference to the Issue, refers to the process of collection of Bids on the basis of the
Red Herring Prospectus within the Price Band, which will be decided by our Company and the Selling
Shareholder in consultation with the BRLMs and advertised at least one working day prior to the Bid Opening
Date. The Issue Price is finalised after the Bid/ Issue Closing Date. The principal parties involved in the Book
Building Process are:

1. our Company;
2. the Selling Shareholder;
3. the BRLMs;
4. the Syndicate Members who are intermediaries registered with SEBI or registered as brokers with BSE/
NSE and eligible to act as Underwriters. The Syndicate Members are appointed by the BRLMs;
5. the SCSBs;
6. the Registrar to the Issue; and
7. the Escrow Collection Banks.

The Issue will be made through the 100% Book Building Process wherein up to 50% of the Net Issue will be
allocated on a proportionate basis to QIBs. Out of the QIB Portion (excluding the Anchor Investor Portion), 5%
shall be available for allocation on a proportionate basis to Mutual Funds only. The remainder shall be available
for allocation on a proportionate basis to QIBs and Mutual Funds, subject to valid Bids being received from
them at or above the Issue Price. Further, not less than 15% of the Net Issue will be available for allocation on a
proportionate basis to Non-Institutional Bidders and not less than 35% of the Net Issue will be available for
allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above
the Issue Price.

55
In accordance with the SEBI Regulations, QIB Bidders are not allowed to withdraw their Bid(s) after the
Bid Closing Date. For further details, see “Terms of the Issue” beginning on page 247.

Our Company and the Selling Shareholder shall comply with the SEBI Regulations and any other ancillary
directions issued by SEBI for this Issue. In this regard, our Company and the Selling Shareholder have
appointed the BRLMs to manage the Issue and procure subscriptions to the Issue.

The Book Building Process under the SEBI Regulations is subject to change from time to time and the
investors are advised to make their own judgment about investment through this process prior to making
a Bid or application in the Issue.

Illustration of Book Building Process and Price discovery process (Investors should note that this example is
solely for illustrative purposes and is not specific to the Issue; it excludes bidding by Anchor Investors or ASBA
process)

Bidders can bid at any price within the price band. For instance, assume a price band of Rs. 20 to Rs. 24 per
equity share, issue size of 3,000 equity shares and receipt of five bids from bidders, details of which are shown
in the table below. A graphical representation of the consolidated demand and price would be made available at
the bidding centres during the bidding period. The illustrative book below shows the demand for the equity
shares of the issuer company at various prices which is collated from bids received from various investors.

Bid Quantity Bid Amount (Rs.) Cumulative Quantity Subscription


500 24 500 16.67%
1,000 23 1,500 50.00%
1,500 22 3,000 100.00%
2,000 21 5,000 166.67%
2,500 20 7,500 250.00%

The price discovery is a function of demand at various prices. The highest price at which the issuer is able to
issue the desired number of shares is the price at which the book cuts off, i.e., Rs. 22 in the above example. The
issuer, in consultation with the BRLMs, will finalise the issue price at or below such cut-off price, i.e., at or
below Rs. 22. All bids at or above this issue price and cut-off bids are valid bids and are considered for
allocation in the respective categories.

Steps to be taken by the Bidders for Bidding

1. Check eligibility for making a Bid (see “Issue Procedure - Who Can Bid?” on page 255);

2. Ensure that you have a demat account and the demat account details are correctly mentioned in the Bid
cum Application Form;

3. Ensure that you have mentioned your PAN, Client ID and DP ID in the Bid cum Application Form. In
accordance with the SEBI Regulations, PAN would be the sole identification number for participants
transacting in the securities market, irrespective of the amount of transaction (see “Permanent Account
Number or PAN” in section “Issue Procedure” beginning on page 254);

4. Ensure that the Bid cum Application Form is duly completed as per instructions given in this Draft Red
Herring Prospectus and in the Bid cum Application Form;

5. Bids by QIBs (including Anchor Investors) will only have to be submitted to the BRLMs and/or their
affiliates, other than Bids by QIBs (excluding the Anchor Investors) who Bid through ASBA process,
who shall submit the Bids to the Designated Branches of the SCSBs;

6. ASBA Bidders will have to submit Bids (physical form) to the Designated Branches. ASBA Bidders
should ensure that the ASBA Account has adequate credit balance at the time of submission to the
SCSB to ensure that the ASBA Bid cum Application Form is not rejected.

56
Underwriting Agreement

After the determination of the Issue Price but prior to the filing of the Prospectus with the RoC, our Company
and the Selling Shareholder will enter into an Underwriting Agreement with the Underwriters for the Equity
Shares proposed to be offered through the Issue. It is proposed that pursuant to the terms of the Underwriting
Agreement, the BRLMs shall be responsible for bringing in the amount devolved in the event that the Syndicate
Members do not fulfill their underwriting obligations. The underwriting shall be to the extent of the Bids
uploaded by the Underwriters including through its respective Syndicate Member/ sub-syndicate. The
Underwriting Agreement is dated [•].

The Underwriters have indicated their intention to underwrite the following number of Equity Shares:

This portion has been intentionally left blank and will be filled in before filing of the Prospectus with the RoC.

Name and Address of the Underwriters Indicated Number Amount


of Equity Shares to Underwritten
be Underwritten (Rs. in Million)
SBI Capital Markets Limited [●] [●]
202, Maker Tower ‘E’,
Cuffe Parade,
Mumbai 400 005
IDFC Capital Limited [●] [●]
Naman Chambers, C-32, G-Block,
Bandra Kurla Complex,
Bandra (East),
Mumbai 400 051
ICICI Securities Limited [●] [●]
ICICI Centre,
H. T. Parekh Marg,
Churchgate,
Mumbai 400 020

The above mentioned is indicative underwriting and this will be finalised after determination of the Issue Price
and actual allocation.

In the opinion of the Board of Directors (based on a certificate given by the Underwriters), the resources of the
above mentioned Underwriters are sufficient to enable them to discharge their respective underwriting
obligations in full. The above mentioned Underwriters are registered with SEBI under Section 12(1) of the SEBI
Act or registered as brokers with the Stock Exchange(s). The Board of Directors, at its meeting held on [●], has
accepted and entered into the Underwriting Agreement mentioned above on behalf of our Company.

Allocation among Underwriters may not necessarily be in proportion to their underwriting commitments.
Notwithstanding the table above, the BRLMs and the Syndicate Members shall be responsible for ensuring
payment with respect to Equity Shares allocated to investors procured by them. In the event of any default in
payment, the respective Underwriter, in addition to other obligations defined in the Underwriting Agreement,
will also be required to procure subscriptions for/subscribe to Equity Shares to the extent of the defaulted
amount.

Notwithstanding the foregoing, the Issue is also subject to obtaining final listing and trading approvals of the
Stock Exchanges, which our Company shall apply for after Allotment.

57
CAPITAL STRUCTURE

The equity share capital of our Company as at the date of this Draft Red Herring Prospectus is set forth below:

(In Rs. except share data)


Aggregate Value at Aggregate Value at
Face Value Issue Price
A AUTHORISED SHARE CAPITAL
1,000,000,000 Equity Shares 10,000,000,000

B ISSUED, SUBSCRIBED AND PAID-UP CAPITAL


BEFORE THE ISSUE
423,453,645 Equity Shares 4,234,536,450 [●]

C PRESENT ISSUE IN TERMS OF THIS DRAFT


RED HERRING PROSPECTUS
84,690,730 Equity Shares 846,907,300 [●]
of which
Fresh Issue of 42,345,365 Equity Shares1 423,453,650
Offer for Sale of 42,345,365 Equity Shares2 423,453,650 [●]

D Employee Reservation of 423,454 Equity Shares 4,234,540 [●]

E Net Issue to the public of 84,267,276 Equity Shares 842,672,760 [●]

F EQUITY CAPITAL AFTER THE ISSUE


465,799,010 Equity Shares 4,657,990,100 [●]

G SECURITIES PREMIUM ACCOUNT


Before the Issue Nil [●]
After the Issue [●] [●]
1
The Fresh Issue has been authorised by a resolution of our Company’s Board dated August 11, 2010 and by a special
resolution passed pursuant to section 81(1A) of the Companies Act, at the Annual General Meeting of the shareholders
of our Company held on September 29, 2010.
2
Approval of the Selling Shareholder dated October 12, 2010, approving the Offer for Sale.

Changes in the Authorised Equity Share Capital

(1) The initial authorised equity share capital of Rs. 100,000,000 divided into 1,000,000 equity shares of
Rs. 100 each was increased to Rs. 150,000,000 divided into 1,500,000 equity shares of Rs. 100 each,
pursuant to a resolution of the shareholders of our Company dated December 31, 1960.

(2) The authorised equity share capital of Rs. 150,000,000 divided into 1,500,000 equity shares of Rs. 100
each was increased to Rs. 350,000,000 divided into 3,500,000 equity shares of Rs. 100 each, pursuant
to the Shipping Corporations Amalgamation Order, 1961 dated October 1, 1961 effective from October
2, 1961. For further details, see “History and Certain Corporate Matters” beginning on page 117.

(3) The authorised equity share capital of Rs. 350,000,000 divided into 3,500,000 equity shares of Rs. 100
each was increased to Rs. 1,000,000,000 divided into 10,000,000 equity shares of Rs. 100 each,
pursuant to a resolution of the shareholders of our Company dated January 23, 1984.

(4) The authorised equity share capital of Rs. 1,000,000,000 divided into 10,000,000 equity shares of Rs.
100 each was increased to Rs. 3,500,000,000 divided into 35,000,000 equity shares of Rs. 100 each
pursuant to a resolution of the shareholders of our Company dated August 29, 1991.

(5) The authorised equity share capital of Rs. 3,500,000,000 divided into 35,000,000 equity shares of Rs.
100 each was split into 350,000,000 equity shares of Rs. 10 each pursuant to a resolution of the
shareholders of our Company dated September 18, 1992.

58
(6) The authorised equity share capital of Rs. 3,500,000,000 divided into 350,000,000 equity shares of Rs.
10 each was increased to Rs. 4,500,000,000 divided into 450,000,000 equity shares of Rs. 10 each
pursuant to a resolution of the shareholders of our Company dated September 21, 1995.

(7) The authorised equity share capital of Rs. 4,500,000,000 divided into 450,000,000 equity shares of Rs.
10 each was increased to 10,000,000,000 divided into 1,000,000,000 equity shares of Rs. 10 each
pursuant to a resolution of the shareholders of our Company dated July 21, 2010.

Notes to the Capital Structure

1. Share Capital History of our Company

(a) The following is the history of the equity share capital and securities premium account of our
Company:

Date of allotment No. of Face Issue Consideration Cumulative Cumulative Cumulative


of the Equity Equity Value Price (cash, other No. of Equity paid-up Equity Securities
Shares Shares (Rs.) (Rs.) than cash etc) Shares Share Capital Premium
Allotted (Rs.) (Rs.)
March 24, 1950 200,000 100 100 Cash 200,000 20,000,000 -
March 17, 1952 100,000 100 100 Cash 300,000 30,000,000 -
November 27, 250,000 100 100 Cash 550,000 55,000,000 -
1953
March 15, 1959 75,000 100 100 Cash 625,000 62,500,000 -
December 10, 195,000 100 100 Cash 820,000 82,000,000 -
1959
September 12, 180,000 100 100 Cash 1,000,000 100,000,000 -
1960
October 3, 1961 1,300,000 100 100 Other than 2,300,000 230,000,000 -
cash(1)
March 10, 1962 45,000 100 100 Cash 2,345,000 234,500,000
October 30, 1972 449,844 100 100 Other than 2,794,844 279,484,400 -
cash(2)

March 5, 1973 100 100 100 Other than 2,794,944 279,494,400 -


cash(3)
October 16, 1983 4,205,000 100 100 Other than 6,999,944 699,994,400 -
cash(4)
June 30, 1986 19,012 100 100 Other than 7,018,956 701,895,600 -
cash(5)
November 4, 1991 19,104,000 100 100 Other than 26,122,956 2,612,295,600 -
cash(6)
April 2, 1992 2,107,287 100 100 Other than 28,230,243 2,823,024,300 -
cash(7)
September 18, - 10(8) - - 282,302,430 2,823,024,300 -
1992
November 3, 2008 141,151,215 10 10 Bonus issue of 423,453,645 4,234,536,450 -
in the ratio of
1:2
(1)
1,300,000 equity shares were allotted to our Promoter pursuant to the Shipping Corporations Amalgamation Order, 1961 (“Order”)
dated October 1, 1962.
(2)
Our Company issued 449,893 fully paid up equity shares of Rs. 100 each and one equity share as partly paid up to our Promoter as
consideration for the transfer of 2,88,028 equity shares of Jayanti Shipping Company Limited. One partly paid equity share was called
upon on and made fully paid up on December 19, 1972.
(3)
Our Company issued 100 equity shares of Rs. 100 each to eight persons in lieu of 100 equity shares of Jayanti Shipping Company
Limited pursuant to the Shipping Corporation of India and Jayanti Shipping Company Limited Amalgamation Order, 1973. These equity
shares were then transferred to our Promoter.
(4)
Our Company issued 4,205,000 equity shares of Rs. 100 each to our Promoter to be adjusted against the repayment of loan due to the
Ship Development Fund Committee.
(5)
Our Company issued 19,012 equity shares of Rs. 100 each to our Promoter pursuant to the Shipping Corporation of India Limited and
the Mogul Line Limited Amalgamation Order dated June 26, 1986.
(6)
Our Company issued 19,104,000 equity shares of Rs. 100 each to our Promoter upon conversion of part of the outstanding loans due to
the Government of India in terms of Government directives contained in the letter (No. SS-11021/1/87-SY-II (Vol-II)) dated March 27,
1991.

59
(7)
Our Company issued 2,107,287 equity shares of Rs. 100 each to our Promoter upon conversion of part of the outstanding loans due to
the Government of India in terms of Government directives contained in the letter (No. SS-11021/1/87-SY-II (Vol-II)) dated March 31,
1992.
(8)
Our authorised capital of Rs. 3,500,000,000 divided into 35,000,000 equity shares of Rs. 100 each was split into 350,000,000 equity
shares of Rs. 10 each pursuant to a resolution of the shareholders of our Company dated September 18, 1992.

(b) Equity Shares allotted for consideration other than cash

Date of allotment of No. of Equity Face Value Issue Price Consideration


the Equity Shares Shares (Rs.) (Rs.)
October 3, 1961 1,300,000 100 100 Equity shares were allotted to our Promoter
pursuant to the Shipping Corporations
Amalgamation Order, 1961 (“Order”) dated
October 1, 1962
October 30, 1972 449,844 100 100 Equity shares were allotted to our Promoter
as consideration for the transfer of 2,88,028
equity shares of Jayanti Shipping Company
Limited
March 5, 1973 100 100 100 Equity shares were allotted to eight persons
in lieu of 100 equity shares of Jayanti
Shipping Company Limited pursuant to the
Shipping Corporation of India and Jayanti
Shipping Company Limited Amalgamation
Order, 1973. These 100 equity shares were
transferred to our Promoter by the above
mentioned eight persons.
October 16, 1983 4,205,000 100 100 Equity shares were allotted to our Promoter
to be adjusted against the repayment of loan
due to the Ship Development Fund
Committee
June 30, 1986 19,012 100 100 Equity shares were allotted each to our
Promoter pursuant to the Shipping
Corporation of India Limited and the Mogul
Line Limited Amalgamation Order dated
June 26, 1986
November 4, 1991 19,104,000 100 100 Equity shares were allotted to our Promoter
upon conversion of part of the outstanding
loans due to the Government of India in
terms of Government directives contained in
the letter (No. SS-11021/1/87-SY-II (Vol-
II)) dated March 27, 1991
April 2, 1992 2,107,287 100 100 Equity shares were allotted to our Promoter
upon conversion of part of the outstanding
loans due to the Government of India in
terms of Government directives contained in
the letter (No. SS-11021/1/87-SY-II (Vol-
II)) dated March 31, 1992

2. History of the Equity Share Capital held by the Promoter

(a) Details of the build up of the Promoter’s shareholding in our Company:

Date of Allotment/ No. of Equity Face Issue/ Nature of Nature of % of % of


Transfer Shares Value Acquisit consideration transaction pre- post-
Allotted/ (Rs.) ion (Cash, gift, etc.) Issue Issue
Transferred Price Capital Capital
(Rs.)
March 24, 1950 148,000 100 100 Cash Allotment 0.35 0.32
March 17, 1952 74,000 100 100 Cash Allotment 0.18 0.16
November 27, 1953 185,000 100 100 Cash Allotment 0.44 0.40
April 11, 1957 143,000 100 -* Cash Transferred from 0.34 0.31
Scindia Steam
Navigation
Company Limited
and various

60
Date of Allotment/ No. of Equity Face Issue/ Nature of Nature of % of % of
Transfer Shares Value Acquisit consideration transaction pre- post-
Allotted/ (Rs.) ion (Cash, gift, etc.) Issue Issue
Transferred Price Capital Capital
(Rs.)
persons
March 15, 1959 75,000 100 100 Cash Allotment 0.18 0.16
December 10, 1959 195,000 100 100 Cash Allotment 0.46 0.42
September 12, 1960 180,000 100 100 Cash Allotment 0.43 0.39
October 3, 1961 1,300,000 100 100 Other than cash(1) Allotment 3.07 2.80
March 10, 1962 45,000 100 100 Cash Allotment 0.11 0.10
October 30, 1972 449,844 100 100 Other than cash(2) Allotment 1.06 1.00
March 5, 1973 100 100 100 Cash Transferred from 0.00 0.00
various persons(3)
October 16, 1983 4,205,000 100 100 Other than cash(4) Allotment 9.93 9.03
June 30, 1986 19,012 100 100 Other than cash(5) Allotment 0.05 0.04
November 4, 1991 19,104,000 100 100 Other than cash(6) Allotment 45.12 45.01
April 2, 1992 2,107,287 100 100 Other than cash(7) Allotment 4.98 4.52
September 29, 1992 (52,245,900) 10(8) 34.41(9) Cash Transferred to 12.34 11.22
various banks and
other institutions
pursuant to the
disinvestment
June 15, 1995 (3,864,300) 10 72.61(10) Cash Transferred to 0.91 0.83
various banks and
other institutions
pursuant to the
disinvestment in
October 1994
November 3, 2008 113,096,117 10 - Bonus issue in Allotment 26.71 24.28
the ratio of 1:2
Total 339,288,347
*
Details unavailable
(1)
1,300,000 equity shares were allotted to the Promoter pursuant to the Shipping Corporations Amalgamation Order, 1961 (“Order”)
dated October 1, 1962.
(2)
Our Company issued 449,893 fully paid up equity shares of Rs. 100 each and one equity share as partly paid up to our Promoter as
consideration for the transfer of 2,88,028 equity shares of Jayanti Shipping Company Limited. One partly paid equity share was called
upon on and made fully paid up on December 19, 1972.
(3)
Our Company issued 100 equity shares of Rs. 100 each to eight persons in lieu of 100 equity shares of Jayanti Shipping Company
Limited pursuant to the Shipping Corporation of India and Jayanti Shipping Company Limited Amalgamation Order, 1973. These equity
shares were then transferred to our Promoter.
(4)
Our Company issued 4,205,000 equity shares of Rs. 100 each to Ship Development Fund Committee to be adjusted against the repayment
of loan due to Ship Development Fund Committee.
(5)
Our Company issued 19,012 equity shares of Rs. 100 each to our Promoter pursuant to the Shipping Corporation of India Limited and
the Mogul Line Limited Amalgamation Order dated June 26, 1986.
(6)
Our Company issued 19,104,000 equity shares of Rs. 100 each to our Promoter upon conversion of part of the outstanding loans due to
the Government of India in terms of Government directives contained in the letter (No. SS-11021/1/87-SY-II (Vol-II)) dated March 27,
1991.
(7)
Our Company issued 2,107,287 equity shares of Rs. 100 each to our Promoter upon conversion of part of the outstanding loans due to
the Government of India in terms of Government directives contained in the letter (No. SS-11021/1/87-SY-II (Vol-II)) dated March 31,
1992.
(8)
Our authorised capital of Rs. 3,500,000,000 divided into 35,000,000 equity shares of Rs. 100 each was split into 350,000,000 equity
shares of Rs. 10 each pursuant to a resolution of the shareholders of our Company dated September 18, 1992.
(9)
Average price at which the Equity Shares were transferred during the disinvestment in the year 1992.
(10)
Average price at which the Equity Shares were transferred during the disinvestment in the year 1994.

None of the Equity Shares held by the Promoter are pledged.

(b) Details of Equity Shares locked-in for one year:

The Ministry of Shipping through its letter no. [●] dated October 12, 2010 has granted approval for the lock-in
of its entire post-Issue shareholding, i.e. 296,942,982 Equity Shares, for a period of one year from the date of
Allotment in the Issue or for such other time as may be required in terms of Regulation 36(b) of the SEBI
Regulations.

61
(c) Other requirements in respect of lock-in:

The Equity Shares held by the Promoter which are locked-in for a period of one year can be pledged with any
scheduled commercial bank or public financial institution as collateral security for loans granted by such bank
or financial institution, provided that the pledge of the Equity Shares is one of the terms of sanction of the loan.

(d) Lock-in of Equity Shares to be issued, if any, to the Anchor Investor

Any Equity Shares Allotted to Anchor Investors under the Anchor Investor Portion shall be locked-in for a
period of 30 days from the date of Allotment of Equity Shares in the Issue.

3. Shareholding Pattern of our Company

1. The table below presents the shareholding pattern of Equity Shares before the proposed Issue and as
adjusted for the Issue as on October 8, 2010:

Category of No. of Pre-Issue Post-Issue Shares pledged or


Shareholders Share otherwise
holde encumbered
r Total No. of No. of Equity Total Shareholding Total No. of No. of Equity Total Numbe As a %
Equity Shares Shares in as a % of total No. Equity Shares Shares in Shareholding as a r of of
dematerialised of Equity Shares dematerialised % of total No. of Equity Total
form form Shares Shares No. of
As a % As a % As a As a % Equity
of of % of of Shares
(A+B) (A+B+ (A+B) (A+B+
C) C)
(A)
Shareholding
of Promoter
and
Promoter
Group*
(1) Indian
Individuals / 8 3,057 Nil 0.00 0.00 3,057 Nil 0.00 0.00 Nil Nil
Hindu
Undivided
Family
Central 1 339,285,285 339,285,270 80.12 80.12 296,939,920 296,939,905 63.75 63.75 Nil Nil
Government/
State
Governments
Bodies Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil
Corporate
Financial Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil
Institutions/
Banks
Any other Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil
(specify)
Sub Total (A) 9 339,288,342 339,285,270 80.12 80.12 296,942,977 296,939,905 63.75 63.75 Nil Nil
(1)
(2) Foreign
Individuals Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil
(Non-
Resident
Individuals/
Foreign
Individuals)
Bodies Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil
Corporate
Institutions Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil
Any other Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil
(specify)
Sub Total (A) Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil
(2)
Total 9 339,288,342 339,285,270 80.12 80.12 296,942,977 296,939,905 63.75 63.75 Nil Nil
shareholding
of Promoter
and
Promoter
Group (A)=

62
Category of No. of Pre-Issue Post-Issue Shares pledged or
Shareholders Share otherwise
holde encumbered
r Total No. of No. of Equity Total Shareholding Total No. of No. of Equity Total Numbe As a %
Equity Shares Shares in as a % of total No. Equity Shares Shares in Shareholding as a r of of
dematerialised of Equity Shares dematerialised % of total No. of Equity Total
form form Shares Shares No. of
As a % As a % As a As a % Equity
of of % of of Shares
(A+B) (A+B+ (A+B) (A+B+
C) C)
A(1) + A(2)
(B) Public
Shareholding
(1)
Institutions
Mutual Funds 14 129,145 126,945 0.03 0.03
/ UTI
Financial 11 275,190 274,890 0.06 0.06
Institutions /
Banks
Central Nil Nil Nil Nil Nil
Government /
State
Government(s
)
Venture Nil Nil Nil Nil Nil
Capital Funds
Insurance 12 56,029,396 56,029,396 13.23 13.23
Companies
Foreign 60 9,167,726 9,165,026 2.16 2.16
Institutional
Investors
Foreign Nil Nil Nil Nil Nil
Venture
Capital
Investors
Any other Nil Nil Nil Nil Nil
(specify)
Sub Total 97 65,601,457 65,596,257 15.49 15.49
B(1)
(2) Non-
Institutions
Bodies 1,393 5,953,181 5,938,130 1.41 1.41
Corporate
Individuals
Individual 41,70 10,013,576 9,980,437 2.36 2.36
shareholders 2
holding
nominal share
capital up to
Rs. 1 lakh
Individual 95 1,994,243 1,964,093 0.47 0.47
shareholders
holding
nominal share
capital in
excess of Rs.
1 lakh
Any Others
(Specify)
Non Resident Nil Nil Nil Nil Nil
Indians
Trusts 19 116,725 116,725 0.03 0.03
Clearing Nil Nil Nil Nil Nil
Members
Overseas 1 5,250 5,250 Nil Nil
Corporate
Bodies
Foreign Nil Nil Nil Nil Nil
Corporate
Bodies
Foreign 679 480,871 424,771 0.11 0.11
Nationals
Sub Total 43,88 18,563,846 18,429,406 4.38 4.38

63
Category of No. of Pre-Issue Post-Issue Shares pledged or
Shareholders Share otherwise
holde encumbered
r Total No. of No. of Equity Total Shareholding Total No. of No. of Equity Total Numbe As a %
Equity Shares Shares in as a % of total No. Equity Shares Shares in Shareholding as a r of of
dematerialised of Equity Shares dematerialised % of total No. of Equity Total
form form Shares Shares No. of
As a % As a % As a As a % Equity
of of % of of Shares
(A+B) (A+B+ (A+B) (A+B+
C) C)
B(2) 9
Total Public 43,98 84,165,303 84,025,663 19.88 19.88 168,856,033 168,716,393 36.25 36.25 Nil Nil
shareholding 6
(B)= B(1) +
B(2)
Total (A)+(B) 43,99 423,453,645 423,310,933 100.00 100.00 465,799,010 465,656,298 100.0 100.00 Nil Nil
5 0
(C) Shares Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil
held by
Custodians
and against
which
Depository
Receipts have
been issued
Total 43,99 423,453,645 423,310,933 100.00 100.00 465,799,010 465,656,298 100.0 100.00 Nil Nil
(A)+(B)+(C) 5 0

4. The list of top 10 shareholders of our Company and the number of Equity Shares held by them is as
under:

(a) As of the date of the Draft Red Herring Prospectus:

Sr. No. Name of the shareholder No. of Equity Shares Percentage (%)
held (Pre-Issue)
1. President of India 339,285,270 80.12
2. Life Insurance Corporation Of India 33,707,518 7.96
3. LIC of India Market Plus – 1 7,952,097 1.88
4. General Insurance Corporation Of 4,901,088 1.16
India
5. The New India Assurance Company 3,389,651 0.80
Limited
6. Life Insurance Corporation Of India 2,716,215 0.64
– Profitplus
7. National Insurance Company Ltd 1,473,488 0.35
8. Bajaj Allianz Life Insurance 1,309,694 0.31
Company Ltd.
9. Lok Prakashan Ltd 1,220,046 0.29
10. Wisdomtree India Investment 1,133,129 0.27
Portfolio Inc.
Total 397,088,196 93.78

(b) As of 10 days prior to the date of the Draft Red Herring Prospectus:

Sr. No. Name of the shareholder No. of Equity Percentage (%)


Shares held (Pre-Issue)
1. President of India 339,285,270 80.12
2. Life Insurance Corporation of India 32,774,145 7.74
3. LIC of India Market Plus - 1 6,653,870 1.57
4. General Insurance Corporation of India 4,901,088 1.16
5. The New India Assurance Company
Limited 3,389,651 0.80
6. Life Insurance Corporation of India–
Profitplus 2,716,215 0.64

64
Sr. No. Name of the shareholder No. of Equity Percentage (%)
Shares held (Pre-Issue)
7. Bajaj Allianz Life Insurance Company
Limited 1,609,694 0.38
8. National Insurance Company Limited 1,473,488 0.35
9. LIC Of India Money Plus 1,260,788 0.30
10. Lok Prakashan Limited 1,220,046 0.29
Total 395,284,255 93.35

(c) As of two years prior to the date of the Draft Red Herring Prospectus:

Sr. Name of the shareholder No. of Equity Shares Percentage (%)


No. held (Pre-Issue)
1. President of India 226,190,180 80.12
2. Life Insurance Corporation of India 16,408,681 5.81
3. General Insurance Corporation of India 3,267,392 1.15
4. BSMA Limited 3,253,876 1.15
5. Franklin Templeton Investment Funds 2,031,740 0.71
6. The New India Assurance Company Limited 1,966,675 0.69
7. United India Insurance Company Limited 1,540,911 0.54
8. National Insurance Company Limited 1,268,992 0.44
9. Skagen Kon-Tiki Verdipapirfond 1,000,000 0.35
10. Templeton India Equity Income Fund 976,005 0.34
Total 257,904,452 91.00

5. Our Company, the Selling Shareholder, the Directors and the BRLMs have not entered into any buy-
back arrangement and/or safety net facility for the purchase of Equity Shares from any person.

6. Neither the BRLMs nor their associates hold any Equity Shares of our Company as on the date of filing
this Draft Red Herring Prospectus.

7. Our Company has not raised any bridge loans against the Issue Proceeds.

8. Except as stated in “Management” beginning on page 131, none of the Directors or key management
personnel hold any Equity Shares in our Company.

9. Neither the Promoter, the Directors and their immediate relatives have purchased or sold any Equity
Shares during a period of six months preceding the date on which this Draft Red Herring Prospectus is
filed with SEBI.

10. Our Company has not made any issue of Equity Shares during a period of one year preceding the date
of this Draft Red Herring Prospectus at a price lower than the Issue price.

11. An oversubscription to the extent of 10% of the Issue can be retained for the purposes of rounding off
to the nearer multiple of minimum allotment lot.

12. No person connected with the Issue shall offer any incentive, whether direct or indirect, in any manner,
whether in cash, kind, services or otherwise, to any Bidder.

13. Up to 50% of the Issue shall be allocated to QIBs on a proportionate basis. 5% of the QIB Portion
(excluding Anchor Investor Portion) shall be available for allocation to Mutual Funds only and the
remaining QIB Portion shall be available for allocation to the QIB Bidders including Mutual Funds
subject to valid Bids being received at or above the Issue Price. Further, not less than 15% of the Issue
will be available for allocation on a proportionate basis to Non-Institutional Bidders and not less than
35% of the Issue will be available for allocation to Retail Individual Bidders, subject to valid Bids
being received from them at or above the Issue Price. Under-subscription, if any, in any of the
categories would be allowed to be met with spill over from any other category at the discretion of our
Company, the Selling Shareholder and the BRLMs, in consultation with the Designated Stock
Exchange.

65
14. There are no outstanding warrants, options or rights to convert debentures, loans or other instruments
convertible into the Equity Shares.

15. There will be no further issue of Equity Shares, whether by way of issue of bonus shares, preferential
allotment, rights issue or in any other manner during the period commencing from filing of this Draft
Red Herring Prospectus with SEBI until the Equity Shares have been listed.

16. Our Company presently does not intend or propose to alter the capital structure for a period of six
months from the Bid Opening Date, by way of split or consolidation of the denomination of Equity
Shares or further issue of Equity Shares (including issue of securities convertible into or exchangeable,
directly or indirectly for Equity Shares) whether on a preferential basis or issue of bonus or rights or
further public issue of specified securities or qualified institutions placement or otherwise. However, if
our Company enters into acquisitions, joint ventures or other arrangements, our Company may, subject
to necessary approvals, consider raising additional capital to fund such activity or use Equity Shares as
currency for acquisitions or participation in such joint ventures. For further details, see “Issue
Structure” beginning on page 250.

17. Our Company has complied with the provisions of applicable SEBI guidelines at the time of bonus
issue in the year 2008.

18. The Promoter will not participate in the Fresh Issue.

19. There shall be only one denomination of the Equity Shares, unless otherwise permitted by law. Our
Company shall comply with such disclosure and accounting norms as may be specified by SEBI from
time to time.

20. Our Company has 43,995 members as of the date of filing of this Draft Red Herring Prospectus.

21. Our Company has not issued any Equity Shares out of revaluation reserves. Except as stated above, our
Company has not issued any Equity Shares for consideration other than cash.

22. All Equity Shares will be fully paid-up at the time of Allotment failing which no Allotment shall be
made.

23. There has been no financing arrangement whereby our Promoter, the Directors of our Company and
their relatives have financed the purchase by any other person of securities of our Company other than
in the normal course of business of the financing entity during the period from six months immediately
preceding the date of filing of the Draft Red Herring Prospectus with SEBI until date.

66
OBJECTS OF THE ISSUE

The Issue comprises a Fresh Issue and an Offer for Sale.

Offer for Sale

One of the objects of the Issue is to carry out the divestment of 42,345,365 Equity Shares by the Selling
Shareholder. Our Company will not receive any proceeds from the Offer for Sale and all such proceeds shall go
to the Selling Shareholder.

Objects of the Net Proceeds

Our Company intends to utilize the Net Proceeds for the following objects:

(a) Part funding the equity portion for the acquisition of certain vessels by our Company; and
(b) General corporate purposes.

The main objects clause of the Memorandum of Association enables our Company to undertake the activities for
which the funds are being raised through the Fresh Issue. Further, we confirm that the activities we have been
carrying out until now are in accordance with the objects clause of our Memorandum of Association.

The details of the proceeds of the Fresh Issue are summarized in the table below:
(In Rs. Millions)
Amount
Gross Proceeds from the Fresh Issue [●]
Issue related Expenses [●]
Net Proceeds* [●]
* To be finalized upon determination of the Issue Price

Utilization of Net Proceeds

The intended utilization of the Net Proceeds is summarized in the table below:
(In Rs. Millions)
Particulars Estimated Amount proposed to Total Amount to
Total Cost be financed from be financed from
debt the Net Proceeds/
Internal Accruals
Part funding of the equity portion for the 27,570.20 20,928.16 6,642.04
acquisition of certain vessels by our
Company
General corporate purposes(1) [•] - [•]
Total [•] 20,928.16 [•]
(1)
The amount to be deployed towards general corporate purposes will be decided after finalization of Issue Price

The above fund requirements are based on internal management estimates and have not been appraised by any
bank or financial institution. Until definitive agreements are signed in this regard, the acquisition costs of the
vessels are subject to ongoing variation primarily on account of changes in external circumstances, or costs or
other financial condition, business or strategy.

Our Company operates in a highly competitive and dynamic market, and may have to revise its estimates of the
acquisition cost from time to time, on account of prevailing market conditions. Consequently, the fund
requirements may also change. In the event, the estimated utilization of the Net Proceeds in a Fiscal is not
completely met; the same shall be utilized in the next Fiscal.

67
The following table details the schedule of utilization of Net Proceeds:

(In Rs. Millions)


Vessel Fiscal Year 2011(1) Fiscal Year 2012
Funding the acquisition of certain vessels 4,888.00 1,754.04
General corporate purposes(2) [•] [•]
Total [•] [•]
(1)
Deployment of funds in Fiscal Year 2011 will depend on our Company executing definitive agreements for the identified vessels. There
may be spill over in the deployment of Net Proceeds to the next Fiscal Year in case of any delay in entering into the contract and/or
change in the terms of the payment.
(2)
The amount to be deployed towards general corporate purposes will be decided after finalisation of the Issue Price.

Details of the Objects

1. Part funding the equity portion for the acquisition of certain vessels by our Company

Our Company formulates tonnage acquisition programme on an annual basis which is within a broad outlay of
the ship acquisition programme as per the five year plans of the government. The said tonnage acquisition is
approved by our Board and the Ministry of Shipping. Subsequently for acquisition of particular vessels, our
Company presents the acquisition proposal to our Board for their in-principle approval. Thereafter the tenders
are floated for inviting bids from various shipbuilders. Once a bidder is selected on the basis of technical and
commercial qualifications, the proposal is put forth our Board for the final approval. Post the final approval, our
Company may further negotiate with the ship builder and enter into a vessel acquisition contract/shipbuilding
agreement with the concerned ship builder. Pursuant to the execution of the contract, it takes a period of two to
three years for the delivery of the vessel. The payments to the shipbuilder are spread out over a period of time
and are payable on the milestones as agreed under the contract.

We shall use the internal accruals for the acquisition of the aforesaid vessels pending receipt of the Net
Proceeds. The internal accruals so utilized shall be recouped from the net proceeds of the issue.

Our Company has formulated the vessel acquisition plan for the Fiscal year 2011, which outlines the acquisition
of the following 24 vessels. This plan has been approved by our Board.

Vessel acquisition plan for Fiscal Year 2011:

Type of vessel Specification of the Number of Total DWT


vessel vessels
Supramax Bulk carriers 57,000 DWT 4 228,000
MR Product tankers 47,000 DWT 3 141,000
6500 Container Vessels 6,500 TEU 3 150,000
VLCCs 300,000 DWT 2 600,000
Panamax/Kamsarmax Bulk Carriers 80,000 DWT 4 320,000
AHTSVs 80 TBP 6 12,000
PSVs 30,000 DWT 2 60,000
Total 24 1,511,000

Out of the aforesaid vessel acquisition plan for Fiscal Year 2011, we intend to deploy the Net Proceeds to
partially finance the equity portion of the following vessels:

Type of the Description of DWT Number Estimated time Status of the proposal
vessel the vessel of vessels of delivery
(Fiscal Year)
Kamsarmax Single Hull 82,000 4 2013 Contract entered into on
Bulk Carriers Bulk Carrier September 24, 2010 with
Jiangsu Eastern Heavy
Industries Company Limited
VLCC# Crude Oil 300,000 2 2014 Evaluation of the bids received
Tanker from the ship builders
pursuant to the tenders floated
6500 TEU Container 50,000 3 2014 Evaluation of the bids received

68
Container Vessel from the ship builders
Vessel # pursuant to the tenders floated
Total 9
(#)
Depending on the responses to the tenders floated and the prevailing market conditions, our Company may decide to utilize the Net
Proceeds, to the extent of pending utilization towards the acquisition of such other vessels as mentioned under table “Vessel Acquisition
Plan for Fiscal Year 2011”

Cost of the vessels:

The details of the cost of acquisition of the Identified Vessels are set forth below:
(In Rs. millions)
S. Type of vessel Number Estimated cost Amount to be Amount proposed to
No. of of acquisition financed through be deployed from
vessels third party debt Net Proceeds/
Internal Accruals

1 Kamsarmax Bulk 4 6,260.40 5,008.32 1,252.08


Carriers
2 VLCC 2 10,029.80 8,023.84 2,005.96
3 Container Vessel 3 11,280.00 7,896.00 3,384.00
Total 9 27,570.20 20,928.16 6,642.04

Means of Finance:
(In Rs. Million)
Means of Finance Amount
Total Cost(1) 27,570.20
(Less) Proposed funding from internal accruals [●]
(Less) Expected funding from the Net Proceeds [●]
Balance funds required [●]
75% debt tie-up(2) [●]
In principle sanction of debt available to our Company(2) 20,000.00
(1)
Out of the total cost of Rs. 27,570.20 million for the acquisition of nine vessels mentioned above, an amount of Rs. 20,928.16 shall be
funded through debt and an amount of Rs. 6,642.04 million shall be funded through the Net Proceeds and/or internal accruals of our
Company.
(2)
The Company has received in-principle sanction of Rs. 20,000 million from the State Bank of India vide its letter no. IBG/MB/S-109/557
dated October 8, 2010 towards the debt requirement of the nine vessels identified above.

Funding Arrangement

SCI has made debt arrangements for an amount exceeding 75% of the total fund requirements for acquisitions of
the vessels identified above excluding the Net Proceeds. Further, our Company has adequate internal accruals to
meet the gap in the funding requirements, if any. The BRLMs are thus satisfied about the adequacy of resources
available with the Company to meet the funding gap, if any.

The management of our Company, in accordance with the policies set up by our Board, will have the flexibility
for revising its vessel acquisition plan from time to time. We may have to revise our expenditure and fund
requirements as a result of variations in cost estimates on account of a variety of factors such as changes in type,
design or configuration of the vessel, changes in construction schedule of the vessels, delay in delivery,
incremental pre-operative expenses, exchange rate fluctuations and external factors which may not be within the
control of our management and may entail rescheduling and revising the planned expenditure and funding
requirement and increasing or decreasing the expenditure for a particular purpose from the planned expenditure
at the discretion of our management. In the event of significant variations in the proposed utilisation as per
acquisition plan of our Company for Fiscal Year 2011, approval of the shareholders of our Company shall be
duly sought. In case of variations in the actual utilization of funds earmarked for the purposes set forth above,
increased fund requirements for the aforesaid object may be financed by surplus funds, if any available for
general corporate purposes. If such surplus funds are unavailable, the required financing will be met through
internal accruals and/or debt. Our Company believes that such alternative arrangements would be available to
fund any such shortfall. In the event any surplus funds remain from the Net Proceeds after meeting the aforesaid

69
object, such surplus proceeds will be used for general corporate purposes including for meeting future growth
opportunities.

2. General Corporate Purposes

The Net Proceeds will be first utilised towards the objects referred to above and the balance amount is proposed
to be utilised for general corporate purposes including but not restricted to strategic initiatives, acquisition of
vessels, meeting exigencies, repayment of debt, which the Company in the ordinary course of business may
face, or any other purposes as approved by the Board.

The Company will take such action as may be necessary to insure that the Net Proceeds are not used to fund,
directly or indirectly, any business activities that would be prohibited by sanctions administered or enforced by
the Office of Foreign Assets Control (“OFAC”) of the U.S. Department of the Treasury or any sanctions
contained in any Resolution of the United Nations Security Council or Council of the European Union
(“Sanctions Laws”), including, without limitation, the Company’s joint venture with the Islamic Republic of
Iran Shipping Lines, Irano-Hind Shipping Company. The Company will place the Net Proceeds into a separate
account of the Company that is segregated from all other accounts of the Company. The use of the Net Proceeds
in such segregated account will be monitored by the Company to insure that such funds are not used to fund,
directly or indirectly, any business activities involving any person subject to Sanctions Laws, including without
limitation any investment in, financing of or other business activities with or for the benefit of Irano-Hind.

Issue Expenses

Other than listing fees, which will be paid by our Company, all expenses with respect to the Issue will be shared
between our Company and the Selling Shareholder, in proportion to the Equity Shares contributed to the Issue.

The estimated Issue related expenses are as follows:


(In Rs. Million)
Particulars Amount* As % of total As a
expenses percentage
of Issue
Size
Lead merchant bankers (including, underwriting [●] [●] [●]
commission, brokerage and selling commission)
Fees to the Registrars to the Issue [●] [●] [●]
Fees to the legal advisors [●] [●] [●]
SCSB commission [●] [●] [●]
Bankers to the Issue [●] [●] [●]
Others (Listing fees, Advertising and marketing expenses,
monitoring agency and others)
Total Estimated Issue Expenses [●] [●] [●]
*
Will be incorporated after finalisation of Issue Price

Bridge Financing Facilities

The Company has not raised any bridge loans from any bank or financial institution as on the date of this Draft
Red Herring Prospectus.

Interim use of Net Proceeds

The Company, in accordance with the policies formulated by its Board from time to time, will have flexibility in
deploying the Net Proceeds received from the Issue. The particular composition, timing and schedule of
deployment of the Net Proceeds will be determined by the Company based on the development of the projects.
Pending utilisation of the Net Proceeds for the purposes described above, the Company intends to temporarily
invest the funds in interest bearing liquid instruments including deposits with banks and investments in money
market mutual funds and other financial products, temporarily deploy the funds in working capital loan accounts
and investment grade interest bearing securities as may be approved by the Board.

70
Monitoring of Utilization of Funds

The Company will appoint a monitoring agency to monitor the use of Net Proceeds prior to filing the Red
Herring Prospectus with SEBI. The Board of Directors and [●] will monitor the utilization of the Net Proceeds.
The Company will disclose the utilization of the Net Proceeds under a separate head along with details, for all
such proceeds that have not been utilized. The Company will indicate investments, if any, of unutilized proceeds
of the Net Proceeds in the balance sheet for the relevant financial years subsequent to our listing.

Pursuant to clause 49 of the Listing Agreement, the Company shall, on a quarterly basis, disclose to its Audit
Committee the uses and applications of the Net Proceeds. On an annual basis, the Company shall prepare a
statement of funds utilised for purposes other than those stated in this Draft Red Herring Prospectus and place it
before the Audit Committee. Such disclosure shall be made only until such time that the Net Proceeds have been
utilised in full. The statement shall be certified by the statutory auditors of the Company. Furthermore, in
accordance with clause 43A of the Listing Agreement, the Company shall furnish to the Stock Exchanges on a
quarterly basis, a statement including material deviations if any, in the utilisation of the Net Proceeds from the
objects of the Issue as stated above. This information will also be published in newspapers simultaneously with
the interim or annual financial results, after placing the same before the Audit Committee.

No part of the Issue proceeds (except the proceeds from the Offer for Sale) will be paid by the Company as
consideration to Promoters, the Directors, the Company’s key management personnel except in the ordinary
course of business.

71
BASIS FOR ISSUE PRICE

The Issue Price of Rs. [●] has been determined by the Selling Shareholder and our Company in consultation
with the BRLMs, on the basis of assessment of market demand from the investors for the offered Equity Shares
by way of the Book Building Process. The face value of the equity shares is Rs. 10 each and the Issue Price is
[●] times the face value at the lower end of the Price Band and [●] times the face value at the higher end of the
Price Band.
Investors should also refer to “Risk Factors” and “Financial Statements” beginning on pages x and 156
respectively, to have an informed view before making the investment decision.

Qualitative Factors

• Established brand name and reputation


• Diversified fleet
• Experienced management team
• Well-positioned to grow our fleet size to take advantage of India‘s growth
• Strong balance-sheet
• Strategic joint ventures
• Preferred Indian shipping company with the largest all-India flagged fleet

For more details on qualitative factors, refer to section “Our Business” beginning on page 94.

Quantitative Factors

Information presented in this section is derived from our standalone and consolidated restated financial
statements prepared in accordance with Indian GAAP.

Some of the quantitative factors which may form the basis for computing the Issue Price are as follows:

1. EARNING PER SHARE (EPS)(1)(2)

As per our restated financial statements:

Year ended Basic & Diluted EPS (in Rs.) Weight


March 31, 2010 9.29 3
March 31, 2009 22.66 2
March 31, 2008 17.82 1
Weighted Average 15.17
(1)
Earning per share represents basic earnings per share calculated as net profit attributable to equity shareholders as restated, divided
by a weighted average number of shares outstanding at the end of the year.
(2)
Face value per equity share is Rs.10 each.

Note:
a) The earning per share has been computed on the basis of the restated profits and losses of the respective
years.
b) The denominator considered for the purpose of calculating earnings per share is the weighted average
number of Equity Shares outstanding at the end of the year.
c) EPS calculations have been done in accordance with Accounting Standard 20-“Earning per share”
issued by the Institute of Chartered Accountants of India.

2. PRICE EARNING RATIO (P/E RATIO)

Price/Earning (P/E) ratio in relation to Issue Price of Rs. [●] per share of face value of Rs. 10 each:

a) As per our restated financial statements for year ended March 31, 2010: [●]

72
b) Industry P/E:

Highest 75.50
Lowest 3.30
Industry Composite 13.00
(Source: Capital Markets Online accessed on October 9, 2010)

3. RETURN ON NET WORTH:


Return on net worth as per restated financial statements:

Year ended RoNW (%) Weighted Average


March 31, 2010 6.18% 3
March 31, 2009 15.42% 2
March 31, 2008 13.51% 1
Weighted Average 10.48%

Return on Net Worth represents restated Net profit after tax, divided by Net Worth (excluding miscellaneous
expenditures, if any) as at year end.

4. Minimum Return on Increased Net worth required to maintain pre-Issue EPS for the year ended
March 31, 2010: [●]

5. NET ASSET VALUE PER EQUITY SHARE:

a. As of March 31, 2010: Rs. 150.33


b. Issue Price: [●]*
c. As of March 31, 2010 after the Issue: Rs. [●]
*Issue Price shall be determined on conclusion of the Book Building Process.

Note:
a) Net asset value per Equity Share represents net worth (excluding miscellaneous expenditures, if any) as
restated, divided by the number of Equity Shares outstanding at the end of the year.

6. COMPARISON WITH INDUSTRY PEERS:

Name of the Face Value per EPS (Rs.) P/E Return on Net Book Value
Company equity share Worth (%) per share
(Rs.) (Rs.)
(For the year ended March 31,2010)
Shipping 10 9.29(1) 31.60(2) 6.18%(1) 150.33(1)
Corporation of
India Limited
Peer Group (3)
Great Eastern 10 12.6 26.5 4.09 352.7
Shipping
Company
Mercator Lines 1 - - (10) 44.7
Limited
Varun Shipping 10 - - (21.72) 54.1
Company
(1)
As per restated financial information
(2)
Source: Capital Markets Online accessed on October 9, 2010
(3)
Source: Capital Markets Online accessed on October 9, 2010

Since the Issue is being made through the Book Building Process, the Issue Price will be determined on the
basis of investor demand.

The face value of our Equity Shares is Rs. 10 each and the Issue Price is [●] times of the face value of our
Equity Shares.

73
The Issue Price of Rs. [●] has been determined by the Selling Shareholder and our Company in consultation
with the BRLMs on the basis of the demand from investors for the Equity Shares through the Book Building
Process and is justified based on the above accounting ratios. For further details, please see “Risk Factors”
beginning on page x and the financial information of the Company including important profitability and return
ratios, as set out in “Financial Statements” beginning on page 156 to have a more informed view. The trading
price of the Equity Shares could decline due to the factors mentioned in “Risk Factors” beginning on page x and
you may lose all or part of your investments.

74
STATEMENT OF TAX BENEFITS
The Board of Directors
The Shipping Corporation of India Ltd
Shipping House, 245,
Madame Cama Road,
Mumbai 400 021
India

Dear Sirs,

We hereby clarify that the enclosed statement states the possible tax benefits available to The Shipping
Corporation of India Limited (the Company) and to its shareholders under the provisions of Income Tax Act,
1961 and other direct tax laws, presently in force in India. Several of the benefits outlined in the statement will
be dependent upon the Company or its shareholders fulfilling the conditions prescribed under the relevant
provisions of the statute. Hence, the ability of the Company or its shareholders to derive the tax benefits will be
dependent upon such conditions being fulfilled.

The benefits discussed in the enclosed statement are not exhaustive. This statement is only intended to provide
general information to the investors and is neither designed nor intended to be a substitute for professional tax
advice. In view of the individual nature of the tax consequences and the changing tax laws, each investor is
advised to consult their own tax consultant with respect to the specific tax implications arising out of their
participation in the issue.

We do not express any opinion or provide any assurance as to whether:

(i) The Company is currently availing any of these benefits or will avail these benefits in future; or

(ii) The Company's share holders will avail these benefits in future; or

(iii) The conditions prescribed for availing the benefits would be met with.

The contents of the enclosed statement are based on information, explanations and representations obtained
from the Company and on the basis of the understanding of the business activities and operations of the
Company.

This report is intended solely for informational purposes for the inclusion in the Offer Document in connection
with the Proposed Offer for Sale of Equity Shares of “the Company” by the President of India ("the Offer") and
is not to be used in, referred to or distributed for any other purpose.

For P. S. D. & Associates For Sarda & Pareek


Chartered Accountants Chartered Accountants
Firm Registration No. 004501C Firm Registration No. 109262W

(Prakash Sharam) (Niranjan Joshi)


Partner Partner
Membership Number: 072332 Membership Number: 102789

Place: Mumbai
Dated: October 11, 2010

75
STATEMENT OF TAX BENEFITS

The following possible tax benefits shall be available to the Company and the prospective shareholders under
the Current Direct Tax Laws. Several of these benefits are dependent on the Company or its Shareholders
fulfilling the conditions prescribed under the relevant tax laws. Hence, the ability of the Company or its
shareholders to derive the tax benefits is dependent upon the fulfilling such conditions.

A. To the Company

Under the Income Tax Act, 1961 (IT Act)

• With effect from Financial Year 2004-05 the Company has opted for its assessment of income
under `Tonnage Scheme’.

• A new Chapter XII-G is inserted in the Act containing Sections 115V to 115VZC which
provides for special provisions relating to taxation of the income of shipping companies
popularly known as tonnage tax scheme for taxation of shipping profits. Provisions are
introduced with effect from 1st April, 2005 and, are applicable accordingly, in relation to
assessment year 2005 – 2006 and subsequent years. It has following features:-

• It is a scheme of presumptive taxation whereby the notional income arising from the operation
of a ship is determined based on the tonnage of the ship which is than taxed at the normal
corporate rate applicable for the year.

• Section 115VG gives the manner of computation of the daily tonnage income which when
multiplied by the number of days the ship operated, will give the annual tonnage income from
the ship. A company owning at least one ship may charter in ships subject to certain limits for
the purpose of operation. Relevant shipping income, which replaces the actual income from
the operations, is defined in section 115 V-I Section 115VJ gives the treatment of common
costs.

• The profits from the business of operating qualifying ships will not be taken into consideration
for the purpose of MAT as per section 115VO.

• In terms of section 115VT, a tonnage tax company has to create a reserve of at least 20% of its
book profits to be utilized for the purpose of acquisition of new ships.

• As per section 115VU a tonnage tax company has to comply with a minimum training
requirement in accordance with the guidelines to be issued by the DG (Shipping).

• The company will be expelled if the training requirements are not met for 5 consecutive years.
Section 115VV lays down the limit of 49 percent for chartering in. In terms of section
115VW, maintenance of separate books of account and the audit of the same is compulsory
for a company opting for the scheme. Section 115VX lays down the details regarding valid
certificate which indicates the net tonnage of ships. Sections 115VY and 115VZ provide for
the contingencies of amalgamation and de-merger. Section 115VZB enjoins upon a company
not to abuse the preferential tax regime and section 115VZC provides for expulsion of a
company in case of abuse.

• By virtue of Section 10(34) of the IT Act, income earned by way of dividend income from
another domestic company referred to in Section 115-0 of the IT Act, are exempt from tax in
the hands of the company, subject to provisions of section 14A and rules framed there under.

• By virtue of section 10(35) income earned by way of dividend from units of mutual funds
specified under clause 10 (23D) is exempt from tax, subject to the provisions of Section 14A
and Rules framed there under.

76
B. To the Members of the Company

Bl. Under the Income Tax Act, 1961 (IT Act)

1. All Members

• By virtue of Section 10(34) of the IT Act, income earned by way of dividend income
as referred to in Section 115-0 of the IT Act, are exempt from tax in the hands of the
shareholders, subject to provisions of section 14A and rules framed there under,
wherever applicable.

• By virtue of Section 10 (38) inserted by Finance (No.2 Act, 2004) income arising
from transfer of long term capital asset, being an equity share in the Company is
exempt from tax, if the transaction of such sale has been entered into on or after the
date on which Chapter VII of the Finance (No.2) Act, 2004 comes into force and
such transaction is chargeable to Securities Transaction Tax under that Chapter.

• By virtue of Section 111A of the Income Tax Act, short term capital gain on transfer
of equity share in the Company shall be chargeable to tax @ 15% (Plus applicable
surcharge and education cess), if the transaction of such sale has been entered into on
or after the date on which Chapter VII of the Finance (No.2) Act, 2004 comes into
force and such transaction is chargeable to Securities Transaction Tax under the
Chapter.

2. Resident Members

• In terms of section 10(23D) of the Income Tax Act, 1961, all mutual funds set up by
public sector banks or public financial institutions or mutual funds registered under
the Securities and Exchange Board of India or authorized by the Reserve Bank of
India subject to the conditions specified therein are eligible for exemption from
income tax on their entire income, including income from investment in the shares of
the company, subject to provisions of section 14A and rules framed there under,
wherever applicable.

• Under Section 112 of the income Tax Act, 1961 and other relevant provisions of the
Act, long term capital gains (not covered under Section 10(38) of the Act) arising on
transfer of shares in the Company, if shares are held for a period exceeding 12
months shall be taxed at a rate of 20% (plus applicable surcharge and education cess)
after- indexation as provided in the second proviso to Section 48; or at 10% (plus
applicable surcharge and education cess) (without indexation), at the option of the
Shareholders.

3. Non Resident Indians/Members (other than FIIs and Foreign Venture Capital
investors) Tax on Investment Income and Long Term Capital Gain

• A non resident Indian (i.e. an individual being a citizen of India or person of Indian
Origin) has an option to be governed by the provisions of Chapter XIIA of the
Income Tax Act, 1961 viz. "Special Provisions Relating to certain Incomes of Non-
Residents".

• Under Section 115E of the Income Tax Act, 1961, where shares in the Company are
subscribed for in convertible Foreign Exchange by a Non Resident Indian, capital
gains arising to the non resident on transfer of shares held for a period exceeding 12
months shall (in cases not covered under Section 10(38) of the Act) be
concessionally taxed at the flat rate of 10%( plus applicable, surcharge and
education cess) without indexation benefit but with protection against foreign
exchange fluctuation.

• As per section 90(2) of the Act, the provision of the Act would prevail over the
provision of the tax treaty to the extent they are more beneficial to the Non

77
Resident. Thus, a Non Resident can opt to be governed by the beneficial provisions
of an applicable tax treaty.

Capital gain on transfer of Foreign Exchange Assets, not to be charged in certain cases

• Under provisions of Section 115F of the Income Tax Act, 1961, long term capital
gains (not covered under Section 10(38) of the Act) arising to a non resident Indian
from the transfer of shares of the Company subscribed to in convertible Foreign
Exchange shall be exempt from Income Tax if the net consideration is reinvested in
specified assets within six months of the date of transfer. If only part of the net
consideration is so reinvested, the exemption shall be proportionately reduced. The
amount so exempted shall be chargeable to tax subsequently, if the specified assets
are transferred or converted within three years from the date of their acquisition.

Return of Income not to be filed in certain cases

• Under provisions of Section 115G of the Income Tax Act, 1961, it shall not be
necessary for a Non-Resident Indian to furnish his return of Income if his only
source of income is investment income or long term capital gains or both arising
out of assets acquired, purchased or subscribed in convertible foreign exchange and
tax deductible at source has been deducted there from.

Other Provisions

• Under Section 115-1 of the Income Tax Act, 1961, a Non-Resident Indian may elect
not to be governed by the provisions of Chapter XII-A for any Assessment Year by
furnishing his Return of Income under Section 139 of the Income Tax Act declaring
therein that the provisions of the Chapter shall not apply to him for that assessment
year and if he does so the provisions of this chapter shall not apply to him instead the
other provisions of the Act shall apply.

• Under the first proviso to Section 48 of the Income Tax Act, 1961, in case of a non-
resident, in computing the capital gains arising from transfer of shares of the
Company acquired in convertible foreign exchange (as per exchange control
regulations) protection is provided from fluctuations in the value of rupee in terms of
foreign currency in which the original investment was made. Cost indexation benefits
will not be available in such a case.

• Under Section 54EC of the Income Tax Act, 1961 and subject to the conditions and
to the extent specified therein, long term capital gains (not covered under section
10(38) of the Act) arising on the transfer of shares of the Company will be exempt
from capital gains tax if the capital gain upto Rs.50 lacs are invested within a period
of six months from the date of transfer in “Long Term specified assets”. If only part
of the capital gain is so reinvested, the exemption shall be proportionately reduced.
The amount so exempted shall be chargeable to tax subsequently, if the specified
assets are transferred or converted within three years from the date of their
acquisition.

• Under Section 54F of the Income Tax Act, 1961 and subject to the conditions and to
the extent specified therein, long term capital gains (in cases not covered under
section 10(38) of the Act) arising to an individual or Hindu Undivided Family
(HUF) on transfer of shares of the Company will be exempt from capital gain tax
subject to other conditions, if the net sales consideration from such shares are used
for purchase of residential house property within a period of one year before and two
year after the date on which the transfer took place or for construction of residential
house property within a period of three years after the date of transfer.

If any part of the Capital gain is reinvested the exemption will be reduced proportionately.
The amount so exempted shall be chargeable to tax subsequently, if residential property is
transferred within a period of three years from the date of purchase/construction. Similarly, if

78
the shareholder purchases within a period of two years or constructs within a period of three
years after the date of transfer of capital asset, another residential house, the original
exemption will be taxed as capital gains in the year in which the additional residential house is
acquired.

B.2 Under the Wealth Tax Act, 1957

Shares of the Company held by the shareholder will not be treated as an asset within the meaning of
Section 2 (ea) of Wealth Tax Act, 1957; hence Wealth Tax Act will not be applicable.

Notes:

- All the above benefits are as per the current tax law as amended by the Finance Act, 2010 and will be
available only to the sole/first named holder in case the shares are held by joint holders

- In respect of non residents, taxability of capital gains mentioned above shall be further subject to any
benefits available under the Double Taxation Avoidance Agreements, if any, between India and the
country in which the non-resident has fiscal domicile.

- In view of the individual nature of tax consequences, each investor is advised to consult his/her own
tax advisor with respect to specific tax consequences of his/her participation in the scheme.

- The above statement of possible direct taxes benefits sets out the provisions of law in a summary
manner only and is not a complete analysis or listing of all potential tax consequences of the purchase,
ownership and disposal of equity shares.

79
SECTION IV – ABOUT OUR COMPANY
INDUSTRY OVERVIEW

The shipping industry is fundamental to international trade, being the only practicable and cost effective way
means of transporting large volumes of many essential commodities and finished goods. In 2008, total annual
world seaborne trade amounted to 8.7 billion tonnes of goods (loaded). Dry cargo, including bulk, break bulk
and containerized cargo, accounted for the largest share of goods loaded (66.3%) while oil and related products
made up the balance (Source: International Shipping and World Trade - facts and figures - IMO). The United
Nations Conference on Trade and Development (UNCTAD) estimates that the operation of merchant ships
contributes about US$380 billion in freight rates within the global economy, equivalent to about 5% of total
world trade.).

World Seaborne Trade

Although maritime transport has generally been associated with the carriage of high-volume, low-value goods
such as iron ore and coal, over recent years the share of low-volume, high-value goods such as manufactured
goods carried by sea has been growing. This shift is a function of global and regional GDP growth and a
growing dislocation between the locations of resources, manufacturing bases and key areas of consumption.
World seaborne trade has grown almost continuously since the 1970s. The growth in world seaborne trade is
strongly influenced by any changes in global industrial and economic development trends (Source: Review of
Maritime Transport, 2008, UNCTAD (UNCTAD/RMT/2008)).

During the past three decades, the annual average growth rate of world seaborne trade is estimated to have been
3.1% per annum. At this rate of growth, UNCTAD expects global seaborne trade to increase by 44% in 2020
and double by 2031, potentially reaching 11.5 billion tonnes and 16.04 billion tonnes, respectively (Source:
Review of Maritime Transport, 2008, UNCTAD (UNCTAD/RMT/2008)).

World Seaborne Trade For Selected Years

(Source: Review of Maritime Transport, 2009, UNCTAD (UNCTAD/RMT/2009))

World Merchant Fleet

As of January, 2009, the world merchant shipping fleet reached 1.19 billion DWT in the aggregate, representing
6.7% growth over the last year (Source: Review of Maritime Transport, 2009, UNCTAD (UNCTAD/RMT/2009).
There are four main segments in the shipping industry: bulk carriers, which transport such raw materials as coal
and grain; tankers, which transport such cargo as crude oil, petroleum products and chemicals; container vessels,
which transport freight shipped in containers; and gas tankers which transport mostly liquefied petroleum gas
(or “LPG”) and LNG.

80
Composition of the World Merchant Fleet

General Cargo
9.1%
Container Passenger ships
13.6% 0.5%
Others
LNG 1.0%
Bulk Carriers
3.0%
35.1%
Other
4.1%

Offshore
1.9% Chemical
0.7%

Tankers
35.1%

(Source: Review of Maritime Transport, 2009, UNCTAD (UNCTAD/RMT/2009))

The size of vessels that comprise the world merchant shipping fleet has grown over time. According to
UNCTAD, as of January, 2009, 57.2% of such vessels were more than 20 years old. On the other hand, only
23.8% of vessel tonnage is more than 20 years old. Younger vessels thus contribute more total DWT to the
world merchant shipping fleet (Source: Review of Maritime Transport, 2009, UNCTAD (UNCTAD/RMT/2009).

Age Distribution of World Fleet

Categories 0–4 5–9 10–14 15–19 20 years Average


years years years years and + age
Bulk carriers Ships 16.7 14.9 15.8 10.1 42.5 17.22
dwt 22.9 18.7 17.5 12.1 28.8 14.27
Container ships Ships 31.5 19.5 21.7 11.0 16.4 10.92
dwt 39.8 23.5 17.1 8.6 11.1 9.01
General cargo Ships 9.3 7.8 9.6 11.0 62.3 24.44
dwt 13.7 9.9 12.9 9.4 54.1 22.12
Oil tankers Ships 22.1 14.8 11.1 12.2 39.7 17.55
dwt 29.9 28.3 15.7 13.6 12.6 10.72
Other types Ships 8.2 9.3 9.1 9.5 63.9 25.26
dwt 24.9 15.4 9.6 9.6 40.5 18.24
All ships Ships 11.6 10.4 10.5 10.2 57.2 23.00
dwt 26.9 21.7 15.8 11.7 23.8 13.97
(Source: Review of Maritime Transport, 2009, UNCTAD (UNCTAD/RMT/2009))

The supply of vessels is dependent upon delivery of new vessels and the removal of vessels from the global
fleet, either through scrapping or loss. In general, the prices of new vessels fell considerably during the first
quarter of 2009. The largest price declines were recorded for dry bulk carriers and container ships, while prices
for LNG and LPG tankers remained relatively stable. The most expensive ship continues to be the LNG carrier,
which in April, 2009 cost US$325 million on average (Source: Review of Maritime Transport, 2009, UNCTAD
(UNCTAD/RMT/2009)).

81
New-built prices for ships

Type and size of vessel (USD 1985 1990 1995 2000 2005 2006 2007 2008 April
million) 2009
45,000 dwt dry bulk carrier 11 24 25 20 28 31 39 36 29
72,000 dwt dry bulk carrier 14 32 29 23 35 40 54 42 37
170,000 dwt dry bulk carrier 27 45 40 40 59 70 97 89 72
45,000 dwt tanker 18 29 34 29 43 47 52 48 42
110,000 dwt tanker 22 42 43 41 58 81 72 76 65
300,000 dwt tanker 47 90 85 76 120 130 145 151 130
150,000 m3 LNG 200 225 245 165 205 220 220 245 235
78,000 m3 LPG 44 78 68 60 89 92 93 90 85
20,000 dwt general cargo 12 24 21 19 18 24 25 40 30
2,500 TEU full container ship 26 52 50 35 42 46 66 n.a. n.a.
4,000 TEU full container ship n.a. n.a. n.a. n.a. n.a. n.a. 130 70 48
8,000 TEU full container ship n.a. n.a. n.a. n.a. n.a. n.a. 160 130 110
12,500 TEU full container ship n.a. n.a. n.a. n.a. n.a. n.a. n.a. 165 150
(Source: Review of Maritime Transport, 2009, UNCTAD (UNCTAD/RMT/2009))

Indian Seaborne Trade

At the end of 1951, India had five Major Ports with a throughput of 20 million tonnes per annum. Over the next
three decades, India’s throughput increased to 78 million tonnes per annum. In 1990, India had 12 Major Ports,
and these ports achieved a total throughput of 148 million tonnes per annum, 272 million tonnes per annum and
561 million tonnes per annum in Fiscal Years 1990, 2000 and 2010, respectively (Source: Indian Ports
Association & National Maritime Development Programme, 2006, Ministry of Shipping). The traffic at Indian
ports has grown at a compound annual growth rate of 7.4% during the period from 1994 to 2010.

Ports: Commodity Traffic at all Major Ports ("000 tonnes)

Petroleum Fertilizers Fertilizer Foodgrain Iron Coal Other Total


Oil & Lube (finished) (raw ore cargo
material)
1993– 76,922 4,256 3,187 1,440 34,128 26,427 32,900 179,260
94
1998– 107,444 4,664 8,105 3,571 34,288 42,762 50,886 251,720
99
2003– 122,163 2,857 8,973 6,831 58,810 53,538 91,627 344,799
04
2007– 168,897 10,612 6,052 2,903 91,974 64,725 174,077 519,240
08
2008– 176,138 12,153 6,074 NA 94,036 70,399 171,733 530,533
09
2009– 165,482 10,949 6,779 NA 99,914 71,584 196,260 560,968
10
(Sources: Indian Ports Association).

The Indian Merchant Fleet

Shipping plays an important role in India’s economy. Approximately 95% of the country’s import and export
merchandise trade by volume, and 70% by value, is moved by sea. The size of the Indian merchant shipping
fleet has grown with the volume of Indian import and export trade. During this period, the Indian merchant
shipping fleet grew from 59 vessels of 192,000 GT (Gross Tonnage) in 1947 to 1007 vessels of 9.61 million GT
as of June 30, 2010.

Approximately 9.5% of India’s overseas trade is carried by the Indian merchant fleet. Historically, there has
been a significant gap between growth in India’s overseas trade and available tonnage in the Indian merchant
fleet. As a result, the share of Indian overseas trade being shipped by the Indian merchant fleet has declined.

82
Declining share of Indian Shipping in Indian Overseas Trade

Year General Dry Bulk POL & Products Total Cargo on Total Cargo on
Cargo (Petroleum Oil & Indian Vessels Indian and
Lubricants (POL)) Foreign Vessels
mn % mn % mn tonnes % mn % mn tonnes
tonnes tonnes tonnes
1999- 2.94 7.3 11.95 14.4 55.96 55.0 70.85 31.5 224.62
00
2000- 3.54 8.3 11.10 12.2 40.02 36.2 54.66 22.4 244.33
01
2001- 3.34 5.9 7.80 7.6 35.16 30.9 46.30 17.0 273.04
02
2002- 2.89 5.6 9.38 7.9 30.16 27.4 42.43 15.1 280.34
03
2003- 4.33 5.6 7.75 5.9 35.51 25.8 47.59 13.8 345.65
04
2004- 7.56 8.0 7.82 5.0 39.50 26.6 54.88 13.7 400.58
05
2005- 3.95 3.9 14.63 8.0 42.54 26.4 61.12 13.7 447.14
06
2006- 4.59 3.6 12.13 6.3 44.14 24.7 60.86 12.2 497.81
07
2007- 5.79 3.7 14.52 6.8 34.34 16.4 54.65 9.5 576.35
08
(Source: Working group report on shipping and inland water transport, 11th five year Plan, INSA Annual Review 2008 -09)

According to DG Shipping, the Indian merchant fleet consists of 1,007 vessels comprising of 15.9 million
DWT, as of June 30, 2010, which makes its fleet one of the largest merchant shipping fleets among developing
countries, and ranked 15th in the world. Crude oil tankers comprise 36% of the Indian merchant fleet by tonnage,
representing 74 vessels of 5.82 million DWT. The next largest category is dry bulk cargo carriers, comprising
32% of the fleet, and representing 175 vessels of 5.1 million DWT (Source: Indian Tonnage Statement, June 30,
2010 published by DG Shipping.)

Composition of Indian Shipping Fleet – 15.9 million DWT

POL Tanker
24%

Container Vessels
3%
Crude Oil Tanker LPG Carriers
36% 2%

Others
3%

Dry Bulk Cargo


32%

(Source: Indian Tonnage Statement, June 30, 2010 published by DG Shipping)

83
The Indian merchant shipping fleet includes near coastal vessels and foreign and coastal vessels of in excess of
25 years old. The Indian National Shipowners Association (INSA) expects that about 356 vessels of 4.43
million DWT will need to be scrapped between 2007-2012 as a result of being over 25 years old or for being a
single-hull vessel. As of September 30, 2010, 356 vessels are due for scrapping because of age.

Age Distribution of Indian Fleet

0-5 years 5- 10 10-15 15-20 20 -25 > 25 Total


Years years years years years
Foreign Vessels 85 30 32 46 31 101 325
(no)
Coastal Vessels 112 90 85 76 64 255 682
(no)
Total Number of 197 120 117 122 95 356 1007
Vessels

Foreign Vessels 3,832,669 3,504,323 477,923 1,689,329 1,525,372 3,850,417 14,880,033


(DWT)
Coastal Vessels 70,717 77,848 41,554 71,634 153,554 579,934 995,241
(DWT)
Total Indian 3,903,386 3,582,171 519,477 1,760,963 1,678,926 4,430,351 15,875,274
Tonnage
(Source: Indian Tonnage Statement, June 30, 2010 published by DG Shipping)

Tanker Industry

Global Crude Oil and Petroleum Trade

The tanker industry is the most voluminous element of global seaborne trade. Crude oil and petroleum products
are major transport commodities, representing approximately one-third of the total world seaborne trade,
according to UNCTAD. It is a major part of the transport structure of an oil industry which, according to BP
Statistical Review data, produced an average of 79.95 million barrels of crude oil per day in 2009. The demand
for tanker capacity is closely linked to the wider oil market. Crude oil demand grew steadily at an annual
compound growth rate of 1.2% between 1999 and 2009, from approximately 76.2 million barrels per day (bpd)
to 84.9 million bpd, primarily as a result of global economic growth. The economic slowdown experienced in
2008 and much of calendar year 2009 had an impact on overall crude oil demand, with global demand falling
1.4% in 2009. However, beginning January 2010, global crude oil demand is expected to recover by 2%, with
growth in demand coming primarily from non-OECD countries (Sources: IEA Oil Market Report, April 2010,
IEA Annual Statistical Bulletin, 2009).

(Source: BP Statistical Review of World Energy June 2010)

84
Global crude oil movement is determined by demand patterns. In 2009, demand for crude oil remained
relatively muted in the Organisation for Economic Cooperation and Development (OECD) countries (mainly
Europe) as a result of economic conditions. Global demand for crude oil is expected to increase in 2010 as
demand grows in non-OECD countries and in North America. The demand recovery is expected to continue in
2011, driven primarily by consumption in non-OECD countries, but the pace of demand growth is expected to
decline to 1.5% from 2.2% in 2010 as a result of declining demand in OECD countries (Source: IEA).

Major Crude Oil Movement

(Source: BP Statistical Review of World Energy June 2010) Indian Crude Oil and Petroleum Trade

According to The Directorate General of Hydrocarbon of the Government of India (DGH), India is the fifth
largest consumer of energy, accounting for approximately 3.9% of world consumption. Currently, about three-
fourths of India’s crude oil requirements are met through imports at current levels of economic growth. The
DGH currently expects India’s primary energy demand to more than double by 2030, growing an average rate of
3.6% per annum (Sources: Petroleum Exploration and Production Activities, 2009 published by Directorate
General of Hydrocarbon, India).

Crude Oil Production and Consumption in India

(‘000 MT) 2004-05 2005-06 2006-07 2007-08 2008-09*


Onshore Production 11,590 11,430 11,326 11,213 11,274
Offshore Production 22,391 20,760 22,662 22,905 22,232
Total Production 33,981 32,190 33,988 34,118 33,506
Refining Throughput 127,416 130,109 146,551 156,103 160,772
Import of Crude Oil 93,435 97,919 112,563 121,985 127,266
Import % age 73.3% 75.3% 76.8% 78.1% 79.2%
(Sources: Basic Statistics on Indian Petroleum & Natural Gas, Ministry of Petroleum & Natural Gas, India).

India imported 121.67 million metric tonnes per annum (MMTPA) and 128.15 MMTPA of crude oil during
2007-08 and 2008-09, and exported 40.77 MMTPA and 36.93 MMTPA, respectively, during the same period
(Sources: Mid Term Appraisal for Eleventh Five Year Plan 2007-2012, Planning Commission).

85
The total refining capacity in India at the end during Fiscal Year 2007 was 148.97 MMTPA and is projected to
be 255.83 MMTPA by Fiscal Year 2012. The current refining capacity is 182.09 MMTPA. There are currently
three green field projects at Bhatinda (9 MMTPA), Bina (6 MMTPA) and Paradip (15 MMTPA) with an
aggregate refining capacity of 30 MMTPA under construction. In addition, some refineries are implementing
expansion of the existing capacities at Panipat, Mangalore and Koyali at Vadodara. The total refining capacity is
further expected to be 358 MMTPA to process 364 MMTPA of crude oil by 2025 (Sources: India Hydrocarbon
Vision 2025).

Domestic consumption of petroleum products as per the Eleventh Plan was estimated to reach 141.8 MMTPA
by Fiscal Year 2012 against consumption of 120.74 MMTPA in Fiscal Year 2007. However, domestic
consumption of petroleum products has already surpassed the consumption level projected during Fiscal Year
2008 and Fiscal Year 2009 (Sources: Mid Term Appraisal for Eleventh Five Year Plan 2007-2012, Planning
Commission).

Tanker Fleet

Crude oil tankers transport crude oil cargoes from points of production to points of consumption, typically oil
refineries. Customers include oil companies, oil traders, large oil consumers, refiners, petroleum product
producers, government agencies and storage facility operators. Product tankers normally move refined
petroleum products, typically gasoline, jet fuel, kerosene, fuel oil, naphtha and other soft chemicals and edible
oils. Trading patterns are sensitive both to major geographical events and to small shifts, imbalances and
disruptions at all stages from wellhead production through refining to end use. Seaborne trading distances are
also influenced by infrastructural factors, such as the availability of pipelines and canal “shortcuts”.

Tankers are classified on the basis of vessel size. VLCC /ULCC represent some of the world’s largest ships and
offer the best economies of scale for transportation of oil where pipelines are non-existent. Suezmax ships are
the largest tankers able to transit the Suez Canal. Capable of operating on other routes, Suezmax vessels play an
important role in trading from West Africa to North-West Europe and to the Caribbean East coast of North
America, as well as the Mediterranean (Source: Review of Maritime Transport, 2009, UNCTAD
(UNCTAD/RMT/2009)).

Tanker Classification

Tanker Category Size of the Vessel (DWT)


VLCC / ULCCs 200,000 +
Suezmax 100,000 – 160,000
Aframax 70,000 – 100,000
Handysize less than 50,000
(Sources: Review of Maritime Transport, 2009, UNCTAD (UNCTAD/RMT/2009)).

As of January, 2009, the global tanker fleet aggregated to 418.26 million DWT. During 2008, there were 903
tankers delivered totaling 43.5 million DWT, and 202 vessels totaling to 43.5 million DWT were scrapped.
Worldwide shipyards received new orders during 2009 of 907 vessels of 60 million DWT, increasing the global
orderbook to 2,812 vessels of 190 million DWT (Sources: Review of Maritime Transport, 2009, UNCTAD
(UNCTAD/RMT/2009)).

Indian Tanker and the POL Product Fleet.

As of June 30, 2010, 60% of India’s merchant Fleet by DWT is represented by crude oil carriers and the product
carriers (Source: Indian Tonnage Statement, June 30, 2010 published by DG Shipping). As of June 30, 2010, the
Indian crude tanker fleet stood at 63 vessels aggregating to 5.85 million DWT with an average age of 15 years
and average capacity of approximately 93,000 DWT, and the Indian product tanker fleet stood at 70 vessels
aggregating to 3.61 million DWT with an average age of 17.6 years and an average capacity of 51,650 DWT
(Source: Indian Tonnage Statement, June 30, 2010 published by DG Shipping).

86
Indian Crude Oil Tanker fleet - 63 vessels Indian Crude Oil Tanker Fleet - 5.85 mn
DWT
20-25 yrs 15-20 yrs 20-25 yrs
>25 years
8% 12%
31% 6%
15-20 yrs 10-15 yrs
10% 5% >25 years
20%

10-15 yrs
11% 5- 10 yrs
29%

0-5 yrs
5- 10 yrs 21% 0-5 yrs
19% 28%
(Sources: Indian Tonnage Statement as of June 30, 2010 published by DG Shipping, India).

Indian Product Tanker fleet - 70 vessels


Indian Product Tanker Fleet - 3.62 mn DWT

>25 years 20-25 yrs


36% 14%
15-20 yrs
20-25 yrs
8%
11%
10-15 yrs >25 years
1% 21%

15-20 yrs
13% 5- 10 yrs
23%

0-5 yrs
10-15 yrs 20%
14% 5- 10 yrs 0-5 yrs
6% 33%
(Sources: Indian Tonnage Statement as of June 30, 2010 published by DG Shipping, India).

Crude Oil and Product Tanker Freight Market

Tanker freight rates are measured in World Scale (WS), a unified measure for establishing spot rates in the
world tanker market, on specific major routes by various vessel sizes (Source: Review of Maritime Transport,
2009, UNCTAD (UNCTAD/RMT/2009)). Freight rates for tanker vessels fluctuate with demand for tanker
services, which correlate with demand for crude oil and petroleum products. Tanker freight rates in the first
quarter of 2009 were down when compared with the same period in previous year. Tanker freight rates
fluctuated in 2008, peaking in the middle of the year, before dropping. The most dramatic rate drops in 2008
occurred in the VLCC/ULCC classes.

Annual
Change
Vessel Type and Routes 2007 2008 2008
(2008/
2007)
Dec Jan Feb Mar Apr May Jun July Aug Spt Oct Nov Dec Jan Feb Mar Apr May Jun
ULCC/VLCC (200,000 + DWT)
Persian Gulf – Japan 195 122 96 97 109 212 204 238 84 105 81 57 66 -66.2% 51 44 41 27 27 46
Persian Gulf - Republic of Korea 189 127 99 88 102 167 190 211 83 115 104 63 61 -67.7% 53 42 36 27 27 41
Persian Gulf - Europe 163 135 88 84 69 160 145 141 70 80 62 61 - -62.6% - 35 30 - - 28
Persian Gulf - Caribbean / East coast of North
159 85 86 84 95 132 142 144 82 95 91 54 54 -66.0% 44 34 30 21 20 32
America
Persian Gulf – Japan 220 - - - 160 - - - - 99 - 67 - -69.5% - 55 - 35 - 38
Suezmax (100,000 - 160,000 DWT)
West Africa - Noth West Europe 237 149 124 173 200 237 199 252 159 166 158 118 140 -40.9% 84 68 68 53 52 64
West Africa - Caribbean / East coast of North
251 135 125 157 175 249 190 241 162 166 144 122 139 -44.6% 86 71 77 53 50 61
America
Mediterranean - Mediterranean 223 165 113 224 226 273 214 345 158 167 151 135 121 -45.7% 90 70 73 58 62 78

87
Aframax (70,000 – 100,000 DWT)
Noth West Europe - Noth West Europe 190 163 128 159 196 240 206 229 194 178 149 126 165 -13.2% 99 80 81 72 66 80
Noth West Europe - Caribbean / East coast of
190 170 138 173 194 258 246 222 230 220 165 133 185 -2.6% 105 92 97 82 85 79
North America
Caribbean - Caribbean/ East coast of North
299 204 168 240 226 288 309 233 226 264 206 130 258 -13.7% 105 78 112 59 73 77
America
Mediterranean - Mediterranean 205 183 146 192 251 263 222 272 182 186 157 126 212 3.4% 107 86 74 62 68 103
Mediterranean - North West Europe 193 187 137 174 240 265 218 268 166 187 160 118 173 -10.4% 106 90 71 59 69 90
Indonesia - Far East 237 180 143 140 164 210 226 283 216 175 164 153 153 -35.4% 81 69 67 58 54 54
Handysize (<50,000 DWT)
Mediterranean - Mediterranean 260 198 180 191 211 235 300 314 270 - - 250 200 -23.1% 118 100 109 87 80 109
Mediterranean - Caribbean / East coast of
262 200 174 187 212 279 290 297 275 265 258 153 175 -33.2% 110 96 112 72 80 101
North America
Caribbean - East coast of North America/
334 194 159 221 236 275 344 299 282 291 258 142 243 -27.2% 131 80 108 70 83 106
Gulf of Mexico
All Clean Tankers
Persian Gulf - Japan (70,000 - 80,000 DWT) 195 198 150 135 141 172 260 276 339 327 - - 145 -25.6% 84 106 62 55 56 78
Persian Gulf - Japan (70,000 - 80,000 DWT) 236 224 171 182 166 207 288 309 371 354 336 240 156 -33.9% 85 118 79 52 63 85
Caribbean - East coast of North America/
203 216 190 189 227 298 302 303 299 260 187 165 166 -18.2% 130 116 93 72 106 96
Gulf of Mexico (35,000 - 50,000 DWT)
Singapore - East Asia (25,000 - 35,000 DWT) 322 287 224 260 221 220 306 326 303 403 328 330 236 -26.7% 105 131 98 82 77 -

(Sources: Review of Maritime Transport, 2009, UNCTAD (UNCTAD/RMT/2009)).

The Bulk Carrier Industry

Dry bulk cargo is used in a variety of industrial applications such as energy, construction and manufacturing.
The top five cargoes in the dry bulk shipping market are iron ore, coal, grain, bauxite/alumina and phosphate.
These cargoes are processed as inputs for products. According to UNCTAD, the dry bulk sector accounted for
approximately 66% of total volume transported by sea.

Demand for Dry Bulk Carrier Shipping

Demand for bulk commodities is affected by world and regional macro-and micro-economic and political
conditions. The resulting demand for dry bulk carriers is a product of (a) the amount of cargo transported,
multiplied by (b) the distance over which this cargo is transported. This is further affected by other factors such
as developments in international trade, changes in seaborne and other transportation patterns, weather patterns,
crop yields, armed conflicts, port congestion, canal closures and other diversions of trade. Generally, demand
for larger vessels is affected by the demand for and trade patterns in a small number of commodities. As a result,
charter rates and vessel values of larger ships tend to exhibit greater volatility. Demand for the services of
smaller dry bulk vessels is more diversified and is determined by trade in a larger number of commodities.
Market cycles move broadly in line with developments in the global economy, and dry bulk demand has
benefited from the recent expansion in industrial production in Asia. Iron ore is an important commodity as it
finds its application in production of steel. Around 98% of iron ore is used for production of steel with
remaining being used in coal washeries and cement plants. Brazil and Australia account for two-thirds of the
world’s export of iron ore, whereas China accounts for almost 50% of the world’s iron ore imports, followed by
Japan at 18% (Source: Review of Maritime Transport, 2009, UNCTAD (UNCTAD/RMT/2009)).

Indian Trade Movement with respect to Top Five Bulk Commodities

Indian bulk commodity movement has increased significantly primarily because of shortages of coal to meet
energy demand and iron ore exports fueled by Chinese economic growth. Traffic at India’s major ports has
grown at a compound annual growth rate of 8% during the period 1994 - 2008. Coal and iron ore trade volumes
have grown at a compound annual growth rate of 7% (Sources: Indian Ports Association).

Ports: Bulk Commodity Traffic at Major Ports ("000 tones)

Fertilizers Fertilizer Foodgrain Iron ore Coal Total Dry Bulk cargo
(Finished) (raw material)
1993–94 4,256 3,187 1,440 34,128 26,427 69,438

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1998–99 4,664 8,105 3,571 34,288 42,762 93,390
2003–04 2,857 8,973 6,831 58,810 53,538 131,009
2007–08 10,612 6,052 2,903 91,974 64,725 176,266
2008–09 12,153 6,074 NA 94,036 70,399 182,662
2009–10 10,949 6,779 NA 99,914 71,584 189,226
(Sources: Indian Ports Association).

During the Eleventh Plan, consumption/off-take of coal is likely to grow at 9.0 % resulting in total demand in
Fiscal Year 2012 of 713 MMTA, The 11th Five Year Plan expects that against an overall coal import of 43.08
MMTA in the Fiscal Year 2007, total coal imports are likely to reach 83.33 MMTA by the end of Fiscal Year
2012, accounting for 11.7 per cent of estimated demand. It is also expected that the degree of import dependence
will increase in the and the gap between imports and consumption/off-take demand to be much larger at the end
of the 12th Five Year Plan.

Bulk Carrier Fleet

The bulk carrier fleet is generally divided into four major vessel types based on carrying capacity: Capesize,
Panamax, Handymax and Handysize. (Sources: Review of Maritime Transport, 2009, UNCTAD
(UNCTAD/RMT/2009)).

The supply of bulkers is a function of new bulk carrier deliveries, scrapping and loss of tonnage. As of January
2009, the world bulk carrier fleet had capacity of 418.36 million DWT. The global orderbook of dry bulk
carriers, which was 292 million DWT as of January 2009, is expected to grow by 70% (Sources: Review of
Maritime Transport, 2009, UNCTAD (UNCTAD/RMT/2009)). During 2008, 333 bulkers of 23.7 million DWT
were delivered from shipyards world wide and 76 vessels of 3.3 million DWT were scrapped.

Indian Bulk Carriers.

As of June 30, 2010, the Indian bulk carrier fleet stood at 175 vessels of 5.1 million DWT representing 32% of
the Indian merchant fleet. The Indian bulk cargo fleet is relatively old, with an average age of 21.3 years, and
with average capacity of 29,180 DWT (Source: Indian Tonnage Statement, June 30, 2010 published by DG
Shipping).

Indian Bulk cargo fleet - 175 vessels


Indian Bulk carrier Fleet - 5.1 mn DWT
>25 years
>25 years
44%
43%

20-25 yrs
11% 20-25 yrs
15%

0-5 yrs
15-20 yrs
9%
15-20 yrs 5% 0-5 yrs
15% 15%
5- 10 yrs 10-15 yrs
10-15 yrs 8% 3%
5- 10 yrs
13% 19%
(Sources: Indian Tonnage Statement as of June 30, 2010 published by DG Shipping, India).

Dry Bulk Cargo Freight Rates

The Baltic Dry Index, which is a measure of freight rates for dry bulk cargo ships, reached an all-time high of
11,793 before the global economic slowdown commenced in 2008. Factors contributing to that growth included
demand for pre-Olympic delivery in China and congestion at Brazil and Australia.

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Bulk Carrier Charter Rates

Period Dry cargo tramp time charter (1972 = 100)


2006 2007 2008 2009
January 302 491 812 193
February 298 480 657 259
March 327 550 810 305
April 326 576 795 254
May 323 671 1055 306
June 331 626 1009 410
July 360 673 868
August 417 718 716
September 447 828 550
October 450 985 313
November 447 1013 192
December 484 926 181
Annual Average 376 711 663 288
(Sources: Review of Maritime Transport, 2009, UNCTAD (UNCTAD/RMT/2009)).

Container Ships and Liner Ships Industry

World Container Trade

Container shipping is an important part of global seaborne trade. Global container trade is spread over a range of
long-haul, medium-haul, and short-haul routes. The ‘mainlane’ container trades on the major east-west routes
are the world’s largest in volume terms, with the Transpacific trade forming the world’s largest container trade,
followed by the Far East-Europe trade and the Transatlantic trade. In addition to these trades, there are medium-
haul ‘intermediate’ trades along the mainlane east-west corridor serving the Middle East and the Indian
Subcontinent. The underlying key to the expansion in global container trade since 2002 has been the sharp
increases in Chinese trade volumes, on the back of increased Chinese economic growth and the continued
relocation and outsourcing of manufacturing to China. During periods of global economic slowdown, container
activity growth rates can fall significantly and decrease demand for container vessels, such as in 2009 when
container activity growth dropped.

The liner shipping market is mainly served by container ships and represents around 16% of world goods loaded
in volume terms, according to UNCTAD. While most items can be transported in containers, including cargoes
previously transported in bulk, containers mainly carry finished products ready for consumption. In 2008, the
world containerized trade was estimated at 1.3 billion MT, an increase of 4.6% over previous year. The share of
containerized trade, as part of the world’s total dry cargo increased from 5.1% in 1960 to 25.4% in 2008
(Review of Maritime Transport, 2009, UNCTAD (UNCTAD/RMT/2009)).

Although the growth in container trade seem to have been less affected on certain routes and in certain
directions, including the North-South and South-South directions, growth in container trade has slowed
considerably in 2008. Recent analysis suggests that a restructuring of certain economies is taking place. China is
expanding its imports (i.e. re-stocking and domestic consumption) without expanding its exports. During the
second quarter of 2008, there were about 56 tons of Chinese imports for every 100 tons of exports. In the
equivalent quarter in 2009, this ratio increased to 80 tons of Chinese imports for every 100 tons of exports. This
shift in the overall balance of containerized trade is likely to have implications for liner shipping operators
serving the Chinese market. (Sources: Review of Maritime Transport, 2009, UNCTAD (UNCTAD/RMT/2009)).

Container Fleet

As of January, 2009, the global containership fleet contained 4,638 containerships, with a total capacity of 12.14
million TEUs. As of June 30, 2010, the Indian containership fleet stood at 35 vessels, with a total capacity of
0.458 million DWT. However, the Indian fleet is relatively old, with an average age of vessel of 17.5 years and
an average tonnage of 13,000 DWT (Source: Indian Tonnage Statement, June 30, 2010 published by DG
Shipping). The majority of the Indian fleet is operating under the feeder route movement of the container trade.

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Container Freight Rates

The container shipping freight market is characterized by the rate paid by shippers to liner companies to move
containers on routes within the global liner network. There are limitations and risks to developments in
container freight rates, dependent on future developments in the world economy and global trade patterns and
the development of ordering, deliveries and demolitions in the future. Consumption of manufactured goods has
dropped significantly since the onset of the global financial crisis in 2008, resulting in a corresponding reduced
demand for containerships. According to UNCTAD, over 10 per cent of container ship capacity is reported to be
idle, and despite cancellations and slippage, a collapse in demand and cargo flow is putting significant pressure
on the container trade sector.

Container Carrier Freight Rates

(Sources: Review of Maritime Transport, 2009, UNCTAD (UNCTAD/RMT/2009)).

LNG Carrier Industry

Global LNG Trade

Liquefying natural gas reduces its volume by around 600% when it is cooled to -1620 C, making it possible to
transport large volumes by sea. The typical LNG carrier carries between 145,000 and 155,000 cubic meters of
natural gas on a single voyage, which upon vaporization becomes 89 million to 95 million cubic meters (Review
of Maritime Transport, 2009, UNCTAD (UNCTAD/RMT/2009)).

LNG trade has been constrained by difficulties in sourcing sufficient gas supplies, with a number of liquefaction
projects suffering from delays in the approval and building process. As most ships are ordered to serve specific
LNG projects, a surplus of energy capacity is crated when the completion of the projects is delayed and the
relevant cargo is not available for carriage. (Review of Maritime Transport, 2009, UNCTAD
(UNCTAD/RMT/2009)).

The total consumption of natural gas in Fiscal Year 2009 has been 2.65 billion MMTOE, which represents a
consolidated growth rate of 2.4% over the last 10 years. The total consumption of Natural Gas in India during
this period has grown from 22.6 MMTOE in 1999 and 46.7 MMTOE in 2009 resulting in a CAGR of 7.5%
(Source: BP Statistical Review of World Energy June 2010).

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(Source: BP Statistical Review of World Energy June 2010)

LNG Carrier Fleet

As of January 2009, the world LNG carrier fleet stood at 280 vessels. There are 42 vessels in the global
orderbook and 36 vessels are planned for delivery in 2009 and 2010 respectively (Sources: Review of Maritime
Transport, 2009, UNCTAD (UNCTAD/RMT/2009)).

Contracts in the LNG Carrier Industry

Most LNG vessels are subject to long term contracts and are not susceptible to widely varying spot market
prices that affect other sectors. Daily charter rates in 2008 were on average in the range of $40,000 - $50,000 per
day (Review of Maritime Transport, 2009, UNCTAD (UNCTAD/RMT/2009)). In 2009 the LNG trade has grown
to 242.77 billion cubic meters from 226.5 billion in 2008 recording a growth of 7.2% (Review of Maritime
Transport, 2009, UNCTAD (UNCTAD/RMT/2009), BP Statistical Review of World Energy June 2010).

Offshore Vessels Industry

The offshore oil and gas E&P industry plays a vital role in meeting the demand for oil and gas, as approximately
30.0% of global oil production and 19.0% of global gas production is met by offshore activities (Source: IEA
World Energy Outlook, 2008). Global oil and gas demand is driven by economic activity. Oil demand reached
86.3 million barrels per day (‘bpd’) in the first quarter of 2010. India has experienced some of the most
significant growth in oil and gas demand over the past 10 years, growing by 26% in the past five calendar years.
In the calendar year 2009, Indian oil demand was approximately 3.31 million bpd (Source: IEA Oil Market
Report, April 2010). Offshore oil and gas production in India has increased significantly in recent years, with
Indian offshore oil production reaching approximately 440,000 bpd in the calendar year 2009 (Source: Ministry
of Petroleum and Natural Gas).

Offshore support vessels and drilling units are engaged in supporting the various stages of exploration,
development and production of oil and gas from offshore locations. The demand for support vessels and drilling
units is affected by the level of offshore activity in production, development and exploration which is, in turn,
influenced by a range of economic factors including, oil and gas price trends as well as supply and demand. The
location and depth of oil fields is also an important factor in the industry, with a trend towards increased
activities in more challenging and deeper environments. The global demand for offshore support vessels
declined in the calendar year 2009 as the economic downturn led to reduced global oil demand, oil prices and
offshore E&P activity. Oil prices have since recovered and E&P spending is expected to increase in the calendar
year 2010 along with offshore activity.

The value of support vessels and drilling units and their charter rates are sensitive to changes in the supply and
demand of vessel unit capacity. Competition in the markets for services of offshore support vessels and drilling
units is based primarily on charter rates, location, technical specification, and quality of the vessels or drilling
units and the reputation of the vessel operators. Utilization rates, day rates and the value of vessels and drilling

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units reached a historic high in the middle of the calendar year 2008, but fell significantly in the calendar year
2009 as the economic downturn led to reduced oil demand, lower oil prices and reduced offshore E&P activity.
A significant part of the decline in day rates and asset values occurred in the six months immediately following
the financial crisis in September 2008. Since September 2009, the offshore support vessel and drilling unit
markets have improved and if E&P expenditure growth and oil prices remain firm this recovery is expected to
continue.

Oil Exploration and Production Market in India

The central feature of the petroleum and natural gas sector is that domestic availability of oil resources is limited
and rapid economic growth means that demand will rise rapidly. India’s import dependence has therefore been
rising and is currently 78 per cent for oil. India’s dependence on imported oil is expected to increase in the
future, absent a major domestic oil/gas discovery (Source: Planning Commission).

Government of India has been inviting private investment in exploration of oil and gas in the country since
1980s. However, initial efforts to attract private investment were limited to offshore areas only. Since 1991,
Government of India offered exploration blocks almost on a regular basis for both onshore and offshore areas
and announced six bidding rounds till 1995. A New Exploration Licensing Policy (NELP) was formulated in
Fiscal Year 1998. Under NELP, Production Sharing Contracts (PSCs) for 231 exploration blocks have already
been signed. It is estimated that oil and gas in-place reserves accretion under NELP is approximately 510
million tones oil equivalent (MMTOE) from 16 discoveries (Source: Planning Commission).

Indian OSV Fleet

As of June 30, 2010, the Indian OSV fleet stood at 101 vessels of 0.156 million DWT, with average age of 19.5
years and average tonnage of 1,453 DWT (Source: Indian Tonnage Statement, June 30, 2010 published by DG
Shipping).

Indian OSV Fleet - 101 vessels


Indian OSV Fleet - 0.156 mn DWT
>25 years
49% >25 years
44%

20-25 yrs
13%
20-25 yrs
13%
15-20 yrs
10-15
4% yrs
15-20 yrs 0-5 yrs 1%
10-15 yrs 22% 5- 10 yrs 0-5 yrs
7% 5- 10 yrs
2% 10% 28%
7%
(Source: Indian Tonnage Statement, June 30, 2010 published by DG Shipping)

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OUR BUSINESS

Overview

Our Company was incorporated as ‘Eastern Shipping Corporation Limited’ on March 24, 1950 under the
Companies Act, 1913 in Mumbai. With effect from October 2, 1961, Western Shipping Corporation Limited
was amalgamated with our Company under the Shipping Corporations Amalgamation Order, 1961, issued by
the Government. The name of our Company was changed from Eastern Shipping Corporation Limited to The
Shipping Corporation of India Limited on October 21, 1961. We are one of India’s largest shipping companies
in terms of Indian flagged tonnage, with approximately a 35.0% share of Indian flagged tonnage as of June 30,
2010, according to the website of Directorate General of Shipping, Government of India (D.G. Shipping). As of
September 30, 2010, we owned a fleet of 74 vessels of 5.11 million dead weight tonnage (DWT). As of
September 30, 2010, we had ordered the construction of 29 vessels, which we expect to be delivered between
the year ended 2010 and 2013, and we have plans to order an additional 20 vessels in Fiscal Year 2011. In
addition, as of September 30, 2010, we managed 64 vessels of 0.2 million DWT on behalf of Government
agencies, public sector undertakings, and our joint ventures.

Our fleet includes dry bulk carriers, very large crude carrier (VLCC) tankers, crude oil tankers, product tankers,
container vessels, passenger-cum-cargo vessels, phosphoric acid and chemical carriers, LPG and ammonia
carriers, and offshore supply vessels. As of September 30, 2010, our fleet included 18 dry bulk carriers of
781,777 DWT, four VLCCs of 1,274,175 DWT, 17 crude oil tankers of 1,966,317 DWT, 13 product tankers of
730,990 DWT, ten offshore supply vessels of 17,904 DWT, five container vessels of 202,413 DWT, three
phosphoric acid and chemical carriers of 99,174 DWT, two gas carriers of 35,202 DWT, and two passenger-
cum-cargo vessels of 5,303 DWT.

Our customers are primarily comprised of Government agencies, large industrial concerns, international oil
companies and public sector undertakings. We have also entered into six strategic joint ventures which we
believe provide us with various advantages and access to markets we would have otherwise not enjoyed. For
example, we have entered into three joint ventures with Japanese companies to own and operate LNG tanker
vessels.

Our operating income was Rs. 37,390 million, Rs. 41,635 million, Rs. 34,666 million and Rs. 9,129 for Fiscal
Years 2008, 2009, 2010 and the three-month period ended June 30, 2010, respectively. Our adjusted profit was
Rs. 7,546 million, Rs. 9,595 million, Rs. 3,934 million and Rs. 1,787 million for Fiscal Years 2008, 2009, 2010
and the three-month period ended June 30, 2010, respectively. Our income is principally generated from our
bulk carrier and tanker division which contributed 70.5%, 71.7%, 68.5% and 63.0% of our total income for
Fiscal Years 2008, 2009, 2010 and the three-month period ended June 30, 2010, respectively, and our liner
division which contributed 20.9%, 18.1%, 21.3% and 27.8% of our total income for Fiscal Years 2008, 2009,
2010 and the three-month period ended June 30, 2010, respectively.

Our business is directly impacted by levels of economic activity in general, and international shipping volumes,
particularly in the energy-related shipping sector. In the twelve months ended December 31, 2009, demand for
shipping services as well as the prices charged by international shipping companies dropped significantly, as the
world economy came under pressure and shipping markets underwent a correction, including the Indian
shipping market. Compared to Fiscal Year 2009, our total income and net profit for Fiscal Year 2010 dropped
by 14.3% and 59.0%, respectively. According to the International Monetary Fund, since general economic
conditions have improved, the world trade volume is expected to grow at 9.0% and 6.3% in 2010 and 2011,
respectively. Nevertheless, demand and pricing levels for our services have generally remained well below the
highs reported in previous years.

Our worldwide operations are supported by offices in the four metros of India, namely Mumbai, Delhi, Chennai
and Kolkata and we also have an office in London. As of September 30, 2010, we were further supported by a
network of more than 70 agents worldwide that assist us in our marketing and logistics efforts.

In 1990, we signed our first Memorandum of Understanding with the Government specifying our performance
and operational targets. The Government bestowed the status of “Navratna” on our Company in August 2008
leading to enhanced delegation of powers to our Board, including, but not limited to, the areas of capital
investment, formation of joint venture, and opening of new offices. Our performance has been rated “excellent,”
the highest rating, for 18 years pursuant to our Memorandum of Understanding with the Government.

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Competitive Strengths

We believe that our future success will be principally attributable to the following competitive strengths:

Established brand name and reputation

We started our operations in 1950 and have been one of India’s leading shipping companies with a long
established reputation and strong customer relationships with various public sector undertakings and the
Government, among others. We have received numerous awards from the Government and the private sector for
excellence in customer satisfaction and operational efficiencies, human resource training, environment
consciousness, safety and emergency preparedness. The Government bestowed the status of “Navratna” on our
Company in August 2008. See the section below titled “Awards” for the list of additional awards received by
our Company. We intend to continue to leverage the goodwill of our brand to enhance our relationships with
existing customers and to seek new customers to help us grow our business. We believe that our strong brand
name and the reputation that our Company has built over the last five decades provides us with access to
opportunities to bid for large contracts for our services.

Diversified fleet

We own a variety of modern and technologically-advanced vessels including bulk carriers, VLCCs, crude oil
tankers, product tankers, container vessels, passenger-cum-cargo vessels, phosphoric acid and chemical carriers,
LPG and ammonia carriers and offshore supply vessels. This fleet diversification allows us to enter into
chartering arrangements of varying duration with different types of customers. We believe that our existing fleet
as well as next generation of fleet will have better functional capabilities and operate more efficiently than
equivalent older vessels thereby allowing us to provide improved services to our customers.

Experienced management team

We are led by an experienced and qualified management team with a proven track record of success and
knowledge of the Indian and international shipping industry. Many of our senior managers are former sailors
and captains with years of operational experience. We believe that our management’s expertise in managing
growth, diversifying our fleet and implementing our strategies provides us with significant competitive
advantages.

Well-positioned to grow our fleet size to take advantage of India’s growth

As one of India’s oldest, largest and reputable shipping companies, we are well-positioned to take advantage of
expected future growth in the Indian economy. Since 1961, we have grown our fleet from 19 vessels of 0.19
million DWT to 74 vessels of 5.11 million DWT as of September 30, 2010. We believe that our ability to grow
our fleet size positions us well to take advantage of attractive asset prices and anticipated growth in the shipping
industry as the Indian economy and its ties to international markets grows. The GDP of India grew from
US$837.0 billion to US$1,310.0 billion from the period of 2005 to 2010 representing a growth of 56.5%,
according to the World Bank. Due to our fleet’s ability to provide services to all major ports on the east and
west coast of India, we believe that we are well-positioned to reap the benefits of expected future growth in the
Indian economy.

Strong balance-sheet

As of June 30, 2010, we had Rs. 22,115 million cash and cash equivalents on our balance sheet with a debt to
equity ratio of 0.45 and a current ratio of 2.97. We believe that our strong balance sheet and cash on hand
provides us with greater working capital and the flexibility to sustain our business during difficult economic
times. In addition, our strong balance sheet has allowed us to service interest and principal payments on our debt
in a timely manner. We believe that our strong balance sheet and history of timely loan payments permit us to
enter into favorable financing terms for the acquisition of vessels.

Strategic joint ventures

We have entered into six strategic joint ventures which we believe provide us with various advantages and
access to markets we would have otherwise not enjoyed. Through these joint ventures, we strengthen our ties
with our joint venture partners who are also our charterers. These joint ventures add value to our business. We

95
believe that we are the first Indian shipping company to participate in the transportation of LNG. We have
partnered with three Japanese shipping companies to own and operate three LNG tankers and we have taken
over the operation and management of two LNG tankers. In addition, we have formed a joint venture with
Forbes Gokak Limited and Sterling Investment Corporation Private Limited for the purpose of entering into the
chemical tanker segment. Our joint venture with the Steel Authority of India Limited (SAIL) will pay us on a
cost plus basis and provides us with certainty of cash flows on a long-term basis and provides a benefit in times
of difficult market conditions. We believe that these joint ventures and those we enter into in the future will
provide us with economic and strategic benefits.

Preferred Indian shipping company with the largest all-India flagged fleet

We own the largest fleet in terms of tonnage under the Indian flag, according to D.G. Shipping. All of our
owned vessels are Indian flagged vessels. This fact has in the past provided us with certain advantages in
capturing domestic contracts including those from the Government, especially due to cabotage laws. See the
section below titled “Regulatory Matters” for discussion regarding cabotage laws. In addition, because of our
long standing history, the Government and public sector companies look to us for their shipping requirements,
including transport services for certain sensitive sectors such as oil and gas. In addition, in obtaining Indian
shipping customers, we believe that we have a competitive advantage over foreign vessels that have to obtain
certain certifications under Indian cabotage laws.

Our Business Strategy

Our objective is to maintain our dominant market position in the Indian shipping industry with a focus on high
growth segments. We intend to achieve our objectives through implementation of the following strategies:

Continue to focus on energy-related transportation

The market for energy-related transportation provides opportunities for significant growth. We believe that our
tanker division will continue to benefit from growth in India’s oil refining industry, which requires increased
crude oil imports and refined oil exports, and that our bulk carrier division will benefit from growth in India’s
domestic power and steel industries, both of which are expected to increase the country’s coal imports.
According to the Government Planning Commission, the annual growth rate in India’s demand for coal and
production of coal, during the Government’s 11th five year plan is projected at 9.0% and 7.9%, respectively. We
intend to take advantage of these growth opportunities by employing our vessels for the transportation of coal
and oil. We intend to increase our participation in these markets through direct capital investment and by
entering into strategic alliances with established and significant industry participants.

Improve and optimize our fleet mix through acquiring newly built vessels

The total Indian shipping fleet has not grown in tandem with the overall growth of the Indian seaborne trade
thereby creating opportunities to meet unmet demand. According to the Indian National Shipowners Association
(INSA), during the period from 1999 to 2008 total Indian shipping tonnage increased by 37.0% while the share
of Indian shipping tonnage in Indian overseas trade decreased from 31.5% to 9.5%. We believe that we can
capture additional market share in India and worldwide through investments in additional vessels. As of
September 30, 2010, we had 29 vessels on order to be delivered over the course of the next three years. These
vessels include Aframax tankers and long range tankers, AHTVS vessels, platform supply vessels, Handymax
bulk carriers, Panamax bulk carries and Kamsamax bulk carriers. The additional vessels we have on order are
expected to allow us to increase our total DWT from 5.11 million to 6.84 million.

Apart from the existing vessels on order, we currently have plans to order an additional 20 vessels in Fiscal Year
2011. These new vessels will lower the average age of our fleet, and we believe, thereby reduce our operating
costs. Investments in additional vessels will also allow us to bid on additional charters worldwide thereby
increasing our market share and further diversifying our sources of income. See the section below titled “Fleet
on Order”.

Improve our operating efficiency, quality of service and overall competitiveness

We believe that our customers place high value on our efficiency, high quality of service and responsiveness
under varying market conditions. We intend to improve our operating efficiency and the capacity of our fleet by
(i) ordering the construction of new vessels, thereby reducing the average age of our fleet, (ii) implementing a

96
new information technology system that will integrate our operations across divisions and connect us to our
network of agents worldwide, thereby increasing efficiency in the areas of booking, scheduling and tracking of
our vessels, and (iii) increasing the scope of our logistics capabilities, so as to provide our clients with door to
door solutions, in connection with our container and break-bulk services.

Leverage strong relationships with customers

We intend to further strengthen our relationships with customers by striving to meet or exceed their business
needs. As a major portion of our income is generated from repeat clients, we intend to leverage our existing
relationships with these customers to expand our business. We will continue to explore and evaluate measures to
integrate our shipping activities with the overall maritime and logistic requirements of our customers with a
view to providing efficient and economical, maritime and logistical solutions to the end users.

Maintain diversity in contracts and customers

We will continue to employ our bulk and tanker vessels as well as our containerships to a large number of
companies and Government organizations under short, medium and long-term charters and contracts of
afreightment (COAs) in order to maintain a highly diverse portfolio of customers and charters. Our contracts
have terms that range from twenty days to three years and our customers are geographically diverse with
headquarters and operations based throughout the world. We believe that our strategy minimizes our exposure to
any one customer and allows us to employ our vessels during any particular period in the charter market cycle.
See the section below titled “Chartering”.

Identify and pursue additional strategic alliances

We intend to partner with companies that we believe will enhance our business, fleet or profitability when
suitable opportunities arise. We intend to focus on entering into consortia arrangements in the container segment
and to pursue highly capital intensive segments, such as LNG transportation. The joint ventures we have
currently formed also provide us access to markets that we may otherwise not enjoy. For example, through our
joint ventures we acquired access to the LNG transportation segment, which we previously had not pursued. We
may execute strategic alliances to expand our service offerings and fleet size in India or worldwide.

Expand and further develop our container and break-bulk services

We intend to further expand and develop our container services, as we believe that this is an area of potential
income growth in the future. As part of our service routes, we plan to extend our reach into Southeast Asia,
Southern Africa and North America. We are also reviewing ways in which we can connect our services to ports
in East Africa as we believe that India is emerging as the biggest exporter of goods and project cargo to this
region. We also intend to recommence our India-U.S. containership service in the future.

We intend to continue to further expand and develop our break-bulk business by entering into new joint service
agreements with vessel owners to operate in trade lanes that we believe present areas for diversification and
growth such as Europe to the Middle East, the East Coast of the U.S. to Europe and Southeast to Far East Asia.
We intend to enter into joint ventures with reputable logistics providers for end to end logistical operations for
projects in the area of power, oil and gas and infrastructure.

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Our Existing Business Operations

Our existing business operations are divided into the following three divisions: (1) bulk carriers and tankers, (2)
liner and passenger services, and (3) technical and offshore services.

BUSINESS DIVISIONS

Liner &
Bulk Carrier & Tanker Technical & Offshore
Passenger

Crude

4 VLCC 5 Liner 10 AHTVs


15 Handymax

3 Panamax 6 Suezmax 2 Passenger

4 Aframax

4 LR 2
4 LR 1

1 MR

1 Storage

Product

5 MR

3 GP

2 LR2

Specialized
Carriers

3 Chemical

2 LPG

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Bulk Carriers and Tankers

The bulk carrier and tanker division together are the primary income source and a profit centre for our
Company, accounting for 70.5%, 71.7%, 68.5% and 63.0% of our total income for Fiscal Years 2008, 2009,
2010 and the three-month period ending June 30, 2010, respectively.

Bulk Carriers

A bulk carrier, bulk freighter, or bulker is a merchant vessel specially designed to transport unpackaged bulk
cargo, such as ore, coal, fertilizers, grains and cement in its cargo holds. Presently, bulk carriers are specially
designed to maximize capacity, safety, efficiency, and be able to withstand the rigors of their work. Very small
bulkers are almost indistinguishable from general cargo vessels, and they are often classified based more on the
vessel's use than its design. Bulkers range in size from single-hold mini-bulkers to mammoth ore vessels able to
carry 400,000 DWT. Bulk carriers are available in specialised designs, some are self-unloaders and some
depend on third-party facilities for unloading. Bulk carriers traditionally include Handysize (10,000 to 34,999
DWT) Handymax (35,000 to 49,999 DWT), Panamax (50,000 to 79,999 DWT) and Capesize (80,000 plus
DWT).

According to D.G. Shipping, we are the largest bulk carrier operator in terms of Indian flagged tonnage with
ownership of 18 dry bulk carriers as of June 30, 2010. Our bulk carriers include 15 Handymax size vessels with
total DWT of 701,895 and three Handysize vessels with total DWT of 79,882. We deploy our bulk carriers
worldwide through a combination of COA, spot chartering and period chartering. For example, we have a COA
with SAIL for the carriage of coking coal from Australia to India. Our bulk carrier fleet is approximately 21
years old on average with the age of individual vessel ranging from 10 to 24 years in age.

We intend to expand our bulk carrier fleet by adding the following vessels which are currently on order and are
expected to be delivered between 2011 and 2013:

• Six Handymax bulk carriers of total 344,400 DWT.


• Four Panamax bulk carriers of total 322,620 DWT.
• Four Kamsamax bulk carriers of total 328,000 DWT.

Tankers

Tankers are specially designed to transport large quantities of liquid cargo, such as oil and other petroleum
products. There are two types of oil tankers, namely the crude tanker and the product tanker. While the crude
tanker carries unrefined crude oil, product tankers carry petroleum products, including gasoline, jet fuel,
kerosene, fuel oil, naphtha and other soft chemicals and edible oils, from refineries to locations near consumer
markets. Oil tankers are often classified by their size as well as their occupation. The size classes range from
inland or coastal tankers of a few thousand metric DWT to the mammoth ultra large crude carriers of 320,000
DWT and above.

According to D.G. Shipping, as of June 30, 2010, we are the largest tanker operator in terms of Indian flagged
tonnage with a fleet of 17 crude oil, four VLCCs, and 13 product tankers. We also own the largest tanker in the
Indian fleet, a VLCC of 321,137 DWT. Our tanker fleet is diversified across all sizes: Medium Range, Long
Range-I, Long Range-II, Aframax, Suezmax, Liquefied Petroleum Gas and VLCC. We provide integrated
shipping solutions to the Indian oil industry such as export-import trade, coastal trade and vessel to vessel
transfer of oil. Our tanker fleet is approximately ten years old on average with age of individual vessel ranging
from one to 32 years in age. Our product tankers are engaged in import, export, cross trades and coastal
movement. We have COA arrangements with Hindustan Petroleum Corporation Ltd. (HPCL), Bharat Petroleum
Corporation Ltd. (BPCL), and Mangalore Refinery and Petrochemicals Limited (MRPL) for the transportation
of crude oil. In Fiscal Year 2010 we transported 24.9 million metric tonnes (mmt.) of crude oil, including
approximately 11.4 mmt. of imported crude oil for the Indian oil industry and 6.9 mmt. of coastal movement.
We transported approximately 3.7 mmt. of imported crude oil through in chartered vessels. We carried a total
15.1 mmt. of crude oil for Indian public service undertakings refineries, in Fiscal Year 2010, 75.0% of which
was transported by our own vessels and 25.0% by in chartered vessels. See the section below titled “Chartering”
for description of chartering. Our bulk and tanker division has a broad base of customers including major Indian
and international companies engaged in oil refinement, energy exploration and minerals.

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We intend to expand our tanker fleet by adding the following vessels which are currently on order and are
expected to be delivered between 2010 and 2011:

• Four Aframax tankers of total 460,000 DWT.


• Two LR1 tankers of total 144,600 DWT.
• One LR1 tanker of 105,000 DWT.

Lighterage

Lighterage is the loading or unloading of cargo from one vessel to another vessel. This operation is necessitated
when shallow waters or other impediments prevent a vessel from approaching a berth, or if berths are
unavailable. Our lighterage operations are conducted as part of our tanker activities. Lighterage operations on
the east and west coasts of India facilitate quick turnaround of tankers, which otherwise cannot enter ports due
to vessel size and port restrictions. In Fiscal Year 2010, we carried out 192 ship-to-ship (STS) transfer of 2.5
mmt. of crude oil at various locations off the east and west coasts of India and 45 lighterage operations for STS
transfer of 4.6 mmt. of bulk iron ore off the coast of Goa. As of September 30, 2010, we were the only Indian
shipping company that provides lighterage operations in India.

Specialized Carrier and LNG

Our bulk carriers and tankers division also operate two LPG/ammonia carriers with total DWT of 35,202 and
three chemical tankers with total DWT of 99,174. LPG carriers are deployed mainly in service of the Indian oil
industry on a time charter or voyage charter basis and are utilized for the import of LPG from the Far East and
Middle East as well as coastal movement of LPG from Indian refineries. Our three chemical tankers are used for
importing phosphoric acid from Morocco to India under a ten year COA with Macro Phosphore that expires in
March 2012.

We own three LNG carriers with total DWT of 229,687 under joint ventures, two of which are manned and
managed by our Company. Our LNG tankers are employed under 25 year charter agreements that expire in 2028
(for two carriers) and 2034 (for one carrier). We also operate four chemical tankers with total DWT of 52,092
under our joint ventures.

Chartering

The chartering division is part of our bulk carrier and tanker division and is responsible for meeting all the
requirements of the Company related to the in and out chartering of all vessels. “In chartering” refers to the use
by our Company of vessels owned by a third party and “out chartering” refers to the use of our owned vessels by
a third party. The major part of our activity involves the out chartering of our vessels for suitable employment.
This activity is carried out through a panel of brokers and also through direct contracting with our customers.

Our charter contracts are entered into on a COA, time charter, period charter or voyage charter basis. We aim to
achieve a portfolio mix of all charter contract types so as to reduce the risk of market fluctuations. A brief
description of each form of charter is set out below:

• Trip Time Charter: Time charter contracts are typically entered into from and to a specific port. Fuel,
loading and unloading charges and port dues are borne by the charterer. Charter hire is received for the
vessel on a per day basis.

• Period Charter: Period charter contracts are typically entered into for a fixed period of duration,
ranging from three months to three years. The charge and payment terms are similar to a trip time
charter.

• Voyage Charter: In a typical voyage charter contract, the vessel owner provides the transportation
service, bearing all operating costs and is remunerated in the form of freight charges on a per ton or
lump sum basis.

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• COA: In a typical COA, duration generally ranges from two to three years. COAs are hedged for the
amount of tonnage that is shipped. Some COAs are entered into at a fixed price per tonnage which
increases our protection against market fluctuations.

Liner and Passenger Services

Liner Division

Our liner division has two segments, the containership and break-bulk services. The liner division accounted for
20.9%, 18.1%, 21.3% and 27.8% of our total income for Fiscal Years 2008, 2009, 2010 and the three-month
period ending June 30, 2010, respectively.

Containerships

Containerships are cargo vessels that carry their entire load in truck-size intermodal containers, in a technique
called containerization. The capacity of a containership is measured in twenty-foot equivalent units (TEUs), the
number of standard 20-foot containers measuring 20 × 8.0 × 8.5 feet (6.1 × 2.4 × 2.6 meters) a vessel can carry.
Containerships are designed in a manner that optimizes space. These vessels are built for speed in line with fast
cargo handling work so that cargo can arrive at their destinations fast. Comparatively high speeds and swift turn
around in port are vital in maintaining the liner schedules of containerships. Cargo handling efficiency is sought
from large dockside gantry cranes at the terminals serving large long haul vessels which are generically non-
geared (without their own cranes). All cargo holds contain guides for the containers so that it is easy to slide
them in place. The containers are made so that the corners can be locked in place very easily. Informally known
as “box ships”, containerships carry the majority of the world's dry cargo, meaning manufactured goods.

We operate a network of global containership services, in consortium with internationally reputable shipping
lines. All of our containership routes currently begin and end at Indian ports. As of September 30, 2010, our
containerships consisted of five owned vessels, five in chartered vessels and 16 vessels with loading rights
pursuant to consortium agreements for a total of 26 deployed vessels. Consistent with past practice, in the event
of short term gaps in capacity for tonnage, we anticipate filling such gaps by in chartering vessels.

Our consortium agreements, otherwise known as vessel sharing agreements, are typically entered to cover the
trade route between specific ports in the Indian Subcontinent and Europe and Far East for exchanging container
slots. We enter into consortium agreements to coordinate vessel services and exchange vessel space, thereby
reducing the costly and inefficient over-provision of capacity. Through such consortium agreements we believe
we can enhance the range of ports that we can service while maintaining separate commercial and marketing
operations from our consortium counterparties. The terms of such consortium agreements typically include route
description, slot allocation and operational responsibilities.

As of September 30, 2010, we have five service routes with port stops in the Indian FarEast, Indian
Subcontinent, Europe, the Middle East and the Mediterranean. For four of these routes, we have entered into
consortium agreements that form strategic alliances with international shipping companies. We believe that
these alliances serve to promote more efficient utilization of unused vessel space and increased access to certain
ports. These alliances are with (i) Mediterranean Shipping Company S.A. (MSC) for India-Subcontinent Europe
(ISE) service route servicing Indian Subcontinent and Europe and for India Mediterranean (IMED) service route
servicing India and the Mediterranean, and (ii) Kawasaki Kisen Kaisha Limited, Pacific International Lines
(PTE) Ltd. and Wan Hai Lines for India Far-East Express 1 (INDFEX-1) and Kawasaki Kisen Kaisha Limited,
Pacific International Lines (PTE) Ltd and Wan Hanjin (INDFEX-2) service routes for India Far-East Express 2
(INDFEX-2). Our SCI Middle East India Liner Express (SMILE) service route services the Middle East and
also moves coastal cargo on the Indian west coast. SMILE is a dedicated route operated by our Company
without any consortium agreement.

Our containership service has a varied and diverse customer base from around the world that includes small
retail shippers to large multinational corporations, government entities and numerous small, medium and large
business houses involved in import and export of containerized cargos. Given our diverse customer base, our
income is not dependent on any particular customer or industry.

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The key operational statistics of our five container service routes are set forth in the following table:

Name of Fleet Description and Average Route Description of


Service Commencement Date Voyage Days Service
ISE Total of seven vessels of declared 49 days Colombo Fixed day weekly
capacity of approximately 3,000 to Nhava Sheva service at each port
3,500 TEUs constituting three Pipavav
Company vessels and four MSC Mundra
vessels. In the event, a vessel larger Salalah
than 3,500 TEUs, then the other Felixtowe
party will be entitled to a maximum Hamburg
of 1,750 TEUs. This service first Antwerp
commenced in May 2009. Jeddah
Colombo
IMED Total of six vessels of declared 42 days Colombo Fixed day weekly
capacity of about 2,500 TEUs and JNP service at each port
nominal capacity of about 3,500 Mundra
TEUs at gross weight of 14 Salalah
tons/TEU, two vessels of the Portsaid
Company and four vessels of MSC. Istanbul
Allocation of TEUs on each vessel Barcelona
as follows: Company allocated 834 Genoa
TEUs and MSC allocated 1,666 La Spezia
TEUs at 14 harbor tons per sailing. Portsaid
This service first commence in Salalah
August 2010. Colombo

INDFEX-1 Total of five vessels at 13.5 tons of 35 days NSICT Fixed day weekly
2,700 to 2,900 TEUs. K-Line, Colombo service at each port
WHL, and PIL will put in one Port Klang
vessel each and two vessels of our Singapore
Company. Hong Kong
Busan
Shanghai
Ningbo
Hongkong
Singapore
Port Klang
Colombo
NSICT

INDFEX-2 Total of five vessels of 1,400 to 35 days Chennai Fixed day weekly
1,500 TEUs at 14 tons/TEU in Vizag service at each port
participation with PIL, K-Line and Singapore
Hanjin. The Company is allocated Hong Kong
450 TEUs on each vessel. This Xingang
service first commenced in April Dalian
2001. Qingdao
Hong Kong
Busan
Shekou
Singapore
Port Klang
Chennai
SMILE Dedicated SCI line. Total of three 21 days Colombo Programmed service
vessels of 1,869 TEUs each. Mundra
Jebel Ali
Mundra

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Pipavav
Jnpt
Cochin
Tuticorin
Colombo

As of September 30, 2010, we have an inventory of approximately 47,000 TEUs of which 5,740 TEUs are
onwed and the balance is leased. Container leases are typically subject to a lease agreement. Our containers are
used in our containership services to transport goods for our clients. Our containership services also use certain
feeder services. Feeder services provide smaller vessels than our containerships and assist with the transport of
containers from our vessels to certain ports that we may not be able to access due to vessel size or other
restrictions. As part of our containership operations we enter into feeder arrangements with third party common
carriers between various destinations on the Indian subcontinent depending on market conditions

Break-bulk Service

Break-bulk vessels are general cargo vessels designed to efficiently handle un-containerized cargo. Many
commodities are unsuitable for transporting on modern containerships. Break-bulk vessels often have cranes and
handling equipment capable of loading and unloading alongside piers or barges as needed. Break-bulk vessels
are designed to transport palletized units or individual packages of general cargo. They are compartmentalized
with several “holds” for stowing cargo. Each hold is serviced by shipboard cranes which lift the cargo from
alongside the vessel into and out of the holds. Break-bulk vessels are characterized by large open hatches and
fitted with boom-and-winch gear or deck cranes.

As of September 30, 2010, we do not own or operate any break-bulk vessels. Hence, in order to cater to the
break-bulk and project shipments across the globe, we make space chartering arrangements with other owners
and operators of break-bulk vessels for transporting these cargos from various load ports to their intended
disports. In addition, we make slot charter arrangements for containerized cargos from various ports from where
we do not have a regular container service. Under space/slot chartering arrangements, the break-bulk division
buys space on various break-bulk and project cargo vessels and sells the same to our customers after adding the
other costs and the profit margins. The break-bulk division directly, and through our agents and offices, liaises
with shippers, consignees, vessel owners and operators for ensuring smooth shipment of cargos that generate
income for our Company. In addition to the above activities, the break-bulk division also makes arrangements
for pre-and post-shipment activities, and inland transportation for project shipments. Our break-bulk service
carried approximately 70,000 freight tones in Fiscal Year 2010. Our break-bulk clients include Indian
companies involved in the mining, energy, oil and gas and infrastructure business as well as the Government
and public sector undertakings.

We have also obtained freight forwarding licenses and are registered as a Multimodal Transport Operator. This
has allowed us to offer third party logistics services to assist our customers with end to end logistics for the
delivery of cargo. We have agreements with third party vendors for providing such services as inland
transportation and in port handling. Contracts with such third party vendors are on a cost plus basis. Providing
end to end logistical support to our customers provides us with a competitive advantage and an additional source
of income.

Passenger Services

Passenger vessels include many classes of vessels designed to transport substantial numbers of passengers as
well as cargo. These vessels carry essential commodities like food grains, medicines, vegetables, fruits and other
daily necessities. These commodities are carried either in break-bulk or in containers. The cargo is also loaded
and unloaded at intermediate ports.

As of September 30, 2010, we own two passenger vessels and manage 32 other passenger vessels on behalf of
the Government including 26 vessels for the Andaman & Nicobar Administration, one vessel for the Union
Territory of Lakshwadeep Administration, three coastal vessels for the Geological Survey of India and two
coastal vessels for the Department of Ocean Development. We offer our passenger vessels on a cost plus basis.

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Technical and Offshore

Technical

The technical division’s principal responsibilities include vessel acquisition, disposal of vessels and providing
technical consultancy services to various organizations. This division monitors our fleet and plans for the
replacement of existing vessels or the requirement of additional tonnage, as may be required by developments
within the Company or other organizations in the shipping industry. Operating divisions also submit their
proposal for acquisition of vessels to this division. This division prepares project reports providing the
justification for acquiring vessels and the economic viability of the proposal. Further tenders are floated for
acquiring of new building and/or secondhand vessels. The technical division along with the operating division
prepares the technical specifications of the vessels to be acquired. The offers are invited in two parts: the
technical part and commercial part, which are separately evaluated to determine the party to which the contract
is to be awarded. After selecting a shipyard for the building of a vessel, the technical division prepares the
shipbuilding contract to be signed with the selected shipyard. See below the section “Shipbuilding Contracts”
for further details. The technical division is subsequently closely involved with the onsite supervision of the
shipbuilding process until the date of delivery.

The technical division also evaluates secondhand vessels for acquisition. The technical specifications for
secondhand vessels are prepared by the technical division along with the operating division. A tender is then
floated based on the above specifications. The technical division reviews and evaluates offers based on
commercial terms and the counterparty’s ability to meet the Company’s technical specifications. Secondhand
vessels are purchased on an “as-is where-is” basis with no warranty, pursuant to a thorough physical inspection
of all shortlisted vessels under consideration.

After the economic life of a vessel, typically 25 years, the technical division coordinates and oversees the
process for the disposal of such vessels with the goal of maximizing proceeds. The technical division also
tenders for vessels to be sold, giving their technical specifications. Participating tenders are evaluated by the
technical division which selects the successful bidder and coordinates the sale and delivery process.

The technical division also provides consultancy services to third parties, such as the Andaman & Nicobar
Administration, UTL Administration, UTL Tourism Department, Directorate of Light Houses & Light Ships
and the Geological Survey of India, among others.

Shipbuilding Contracts

From time to time, in order to acquire new vessels, the technical division will lead our efforts to enter into
shipbuilding contracts with shipyards. Such contracts typically have a set price and require the builder to meet
the Company’s technical specifications and principal characteristics, such as delivery date, DWT, speed, fuel
consumption and bollard pull. We typically have certain protections under these contracts, such as adjustments
to contract price or rescission of contract in case of delays in delivery or missed performance metrics as
provided in the concerned shipbuilding contracts. During the shipbuilding process we are typically entitled to
have our representatives monitor the progress of the builder on site at the shipyard. Payments are made on an
installment basis upon the builder reaching certain performance milestones. Typically, the builder is required to
obtain a refund guarantee in our favor from a bank for installment payments. If we legally reject delivery of the
vessel, rescind the contract or the builder goes into liquidation, then all installment payments may be recovered
by invoking the refund guarantee. The builder is required to maintain adequate insurance for the vessel until
delivery and the risk of loss rests on the builder until title passes upon delivery. After delivery, we typically have
a limited time warranty (12 months on average) from the date of delivery and acceptance of vessel covering
inter alia the defects in vessels, its parts, paint and any other defect due to defective design and workmanship or
faulty construction.

Offshore

We offer vital offshore logistics support services to the Indian oil industry in its oil exploration activities. We
own a fleet of ten offshore vessels. These vessels are specifically designed for anchor handling operations, with
open sterns for the decking of anchors. These vessels are employed primarily for the towing, positioning and
mooring of drilling rigs and production facilities, and the lifting and setting of anchors on the seabed. The
defining characteristics of anchor handling towing supply vessels (AHTSVs) are their engine power, measured
in brake horsepower or “bhp” and the size of their winches in terms of “line pull” and wire storage capacity.

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AHTSVs also possess large aft decks, which are utilised during anchor handling and towing operations and to
carry deck cargo. The stern of the vessel is open to the sea, with a stern roller fitted to enable the vessel to
recover and deploy anchors, while maintaining a clear area for the vessel’s tow wire. Due to these attributes,
AHTSVs are also capable of performing a variety of functions, often in demanding environments. From time to
time, when not performing anchor handling and towing services, our AHTSVs also function as platform supply
vessels, as well as serve as standby rescue and fire-fighting vessels for oil spill response and recovery efforts.
Our ten AHTSVs are over 25 years old.

Our AHTSV vessels offer the following services:

• Towing and anchor handling operations in offshore.


• Carriage of men and materials (fuel oil, bulk cement and byrite, deck cargo, refer cargo, pot water, drill
water etc.) between base and offshore installations as well as between offshore installations.
• Carry out standby and rescue operations in offshore installations, if required.
• Carry out routine surveillance in offshore installations for safety and security reasons.
• Assist at single buoy mooring operations of oil tankers in offshore installations.
• Carry out fire fighting duties.

Presently, all ten of our AHTSVs are on long term charter to Oil & Natural Gas Corporation Limited. (ONGC),
which will expire between 2012 and 2013. These long term charter contracts provide us with steady income and
assured use of our vessels. ONGC owned vessels are operated by the Company on operation and maintenance
nomination basis contracts with cost plus arrangements. Accordingly, all the expenses incurred for the operation
of these vessel are reimbursed by ONGC.

We also offer operations, manning, maintenance and management (O&M) services for 30 of the following
vessels owned by ONGC:

• Seismic Survey Vessels


• Well Stimulation Vessels
• Multi Support Vessels
• Diving Support Vessels
• Geotechnical Vessels
• Offshore Supply Vessels

We intend to expand our offshore fleet by adding the following versatile vessels which are currently on order
and are expected to be delivered between 2011 and 2012:

• Four AHTSVs (80 ton bollard pull) of total 8,000 DWT.


• Two AHTSVs (120 ton bollard pull) of total 3,940 DWT.
• Two platform supply vessels of total 6,120 DWT.

Joint Ventures

We have entered into strategic joint ventures in order to gain access to markets that we believe will provide us
with long-term growth. We have entered into two joint ventures for the transportation of LNG with three
Japanese shipping lines, namely, Mitsui OSK Lines Limited, Nippon Yusen Kabushiki Kaisha and Kawasaki
Kisen Kaisha Limited and a third joint venture with the same Japanese shipping lines and Qatar Shipping
Company. We believe that we are the only Indian shipping company engaged in the transportation of LNG, a
vital fuel for India’s power plant, chemical and petrochemical industry. Our joint venture with SAIL provides
for various shipping related services by SAIL SCI Shipping Company Private Limited to SAIL for importing
coking coal and also to participate in world-wide dry bulk shipping trade, handling of import and export cargo
including containers. We have also entered into joint venture agreements with Forbes Gokak Limited and
Sterling Investments Corporation Private Limited, which own and operate chemical tankers. We have also
formed a joint venture entity, Irano-Hind Shipping Company Ltd. Private Joint Stock Company, which has been
in operation for over thirty years pursuant to joint venture agreement with Arya National Shipping Lines. See
the sections titled “History and Certain Corporate Matters” and “Business in Sanctioned Countries and Interest
in Irano-Hind” for further description of our joint ventures.

105
The following table sets forth our joint ventures and percentage of interest:

Joint Venture Company Description of Interest Percentage Interest as of


September 30, 2010
Irano-Hind Shipping Co. Ltd. Equity Shareholding 49.00%
India LNG Transport Co. (No. 1) Ltd. Equity Shareholding 29.08%
India LNG Transport Co. (No. 2) Ltd. Equity Shareholding 29.08%
India LNG Transport Co. (No. 3) Ltd. Equity Shareholding 26.00%
SCI Forbes Ltd. Equity Shareholding 50.00%
SAIL SCI Shipping Private Limited Equity Shareholding 50.00%

Our Fleet

Existing Fleet

We own a variety of modern and technologically advanced vessels including bulk carriers, VLCCs, crude oil
tankers, product tankers, container vessels, passenger-cum-cargo vessels, phosphoric acid and chemical carriers,
LPG and ammonia carriers, and offshore supply vessels. As of September 30, 2010, our fleet consisted of 74
vessels. We float tenders for building of vessels with the intent to use them for their economic life which is
typically 25 years. The following table sets forth the type, number, and percentage of each type of vessel and
total DWT:

VLCCs Crude oil Dry bulk Product Liner Acid Gas Offshore Passenger Total
tankers carriers tankers vessels carriers carriers Supply vessels
Vessels
Nos. 4 17 18 13 5 3 2 10 2 74
No. as 5.41% 22.97% 24.32% 17.57% 6.76% 4.05% 2.70% 13.51% 2.71% 100.0%
% of
Total
Fleet
Total 1,274,175 1,966,317 781,777 730,990 202,413 99,174 35,202 17,904 5,303 5.11
DWT million

Fleet on Order

Over the course of our five decades of operation, we have grown our vessel fleet from 19 to 74 vessels. In line
with our goal of having a diversified and young fleet, we plan to acquire additional vessels. As of September 30,
2010, we had 29 vessels of 1.7 million DWT on order scheduled for delivery between the year ended 2010 and
2013. We have typically acquired vessels with the debt equity ratio of 80-70% debt financing and 20-30%
equity. We typically obtain loans for the acquisition of vessels after we have made payment of the first
installment. These loans are provided by domestic and international lenders and we typically provide the vessel
that is being constructed as security for the loan along with the refund guarantee received from the respective
shipbuilder. See the section below titled “Technical” for a description of the tender process for building of
vessels.

The following table sets forth the number and type of vessels on order, the builder’s shipyard and their
respective date of delivery:

Type of Vessel Number Total DWT Scheduled date of delivery

Aframax Tankers 4 460,000 October 2010 to March 2011


(115,000 DWT each)
LR I Tankers 2 144,600 October 2010
(73,000 DWT each)
LR II Tankers 1 105,000 November 2010
(105,000 DWT each)
AHTSV 4 8,000 January 2011 to July 2011
(80 ton bollard pull)
AHTSV 2 3,940 March 2011 to June 2011

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(120 ton bollard pull)
Platform Supply Vessel 2 6,120 September 2011 to December 2011
Handymax Bulk Carriers 6 344,400 August 2011 to March 2012
(57,400 DWT each)
Panamax Bulk Carriers 4 322620 June 2012 to September 2012
(80,655 DWT each)
Kamsamax Bulk Carriers 4 328,000 November 2012 to July 2013
(82,000 DWT each)
Total 29 1,722,680.0

Future Vessel Acquisitions

The Company makes its acquisition plan in tandem with the Five Year Plans of the Government. Currently,
India is in its 11th Five Year Plan which is for the period 2007-2008 to 2011-2012. Apart from the existing
vessels on order, we currently have plans to order an additional 20 vessels in Fiscal Year 2011 with total capital
expenditures which is estimated to be Rs. 39,715 million.

The following table sets forth the number and type of vessels we currently anticipate acquiring in Fiscal Year
2011 that are not yet on order and the anticipated DWT per type of vessel:

Type of Vessel Number Aggregate DWT


Supramax Bulk Carriers 4 228,000
MR Product Tankers 3 141,000
6500 Container Vessels 3 150,000
VLCCs 2 600,000
AHTSVs 6 12,000
Platform Supply Vessel 2 60,000
Totals 20 1,191,000

Our plans to acquire new vessels are subject to change in our requirements for a kind of vessel, risks and
uncertainties, market conditions and demand some of which are not under our control. In addition, if economic
conditions deteriorate, we may decide to defer some or all of our planned vessel purchases. There can be no
assurance that we will be able to even place orders for the additional vessels that we currently plan to purchase.

Sale of Existing Fleet

After the economic life of our vessels, typically an average of 25 years, we dispose of our vessels through a
tender sale process that is intended to maximize the return on the Company’s original investment. We sold an
aggregate of 11 vessels in 2009 and 2010. In the last three years we have received proceeds from the sale of
vessels amounting to Rs. 1,570 million. See the section below titled “Technical” for a description of the
tendering process.

Purchase of Resale or Secondhand Vessels

From time to time, due to immediate market and operational demands, and because of the time requirement
inherent in the construction of new vessels (typically one to three years), we have purchased secondhand or
resale (new vessels built for another party but sold to us) vessels to join our fleet. As of September 30, 2010, our
fleet consisted of two such purchased vessels. Such purchases are subject to diligent technical review by our
staff to ensure they meet our Company’s standards.

Vessel Maintenance

We are subject to routine drydock inspections, maintenance and repair costs under Indian regulations and to
maintain the relevant certifications for our vessels. In addition to complying with these requirements, we also
have our own comprehensive vessel maintenance programs that we believe allow us to continue to provide our
customers with safe, reliable and efficient vessels.

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Marketing

We adopt a proactive approach towards our customers by gathering market intelligence on trade activities, cargo
prospects and project pipelines. We have increased our marketing efforts for our break-bulk and container
services. Marketing efforts have also been specifically directed at various Government agencies. The majority of
our marketing activities are conducted by our marketing agents for our liner business. Our in-house marketing
team supplements the agents’ marketing activities.
As part of our marketing efforts, we enter into agency arrangements with agents at various ports worldwide.
These agents are primarily responsible for solicitation and booking of cargo, container controlling and
monitoring by the Company’s vessels for customers in their local areas. Typically, they also add efficiencies to
our business by attending to immigration and other government authorities to ensure prompt entry of vessels,
employees obtaining necessary permits, licenses and other authorizations and our representatives at port and by
liaising with port authorities to secure berths for the vessels. They may also be hired to coordinate and supervise
the performance of the stevedoring contractors, towage contractors and terminal companies to ensure careful
lodging and discharging of cargo. Our agency agreements are non-exclusive, but agents are typically required to
obtain our consent before accepting agency of any of our competitors whether directly or indirectly and the
Company may withhold its consent in its absolute discretion. Our agents are typically paid varying agency fees
and commissions depending upon the activity performed and the total cargo weight. Our Company bears
expenses in relation to bills of lading, freight broker and any expenses directly authorized by the Company.

Health, Safety, Quality, Environment and Social Responsibility

We are committed to maintaining high standards of occupational health, safety and environmental protection.
Due to the nature of the operations we conduct, we are subject to various internal and external safety audits to
ensure compliance with health, safety and environmental protection laws and regulations, and to maintain
effective waste prevention and reduction capabilities. We have taken a number of initiatives, such as
implementing systems covering formal safety management, comprehensive incident and near miss reporting and
investigation and emergency response. Further, we conduct regular safety and environmental audits and provide
systematic health and safety training for our employees. We are proactive in establishing policies and operating
procedures for safeguarding the environment against any hazardous materials aboard our vessels and at shore
base locations. Whenever possible, hazardous materials are maintained or transferred in confined areas in an
attempt to ensure containment if accidents occur. In addition, we have established operating policies that are
intended to increase awareness of actions that may harm the environment.

We have obtained the required International Safety Management (ISM) certifications for our owned and
managed vessels from D.G. Shipping which is vested such powers of certification by the International Maritime
Organization (IMO). ISM requirements incorporate occupational health and safety guidelines. All of our vessels
are subject to periodic renewal of Safety Management Certificates (SMC) and are subject to periodic SMC
renewal audits. Our fleet complies with International Ships and Port Facility Security Code. We are ISO
9001:2008 compliant as certified by the Indian Register of Quality Services through July 5, 2013.

Our safety management systems comply with the International Management Code for the Safe Operation of
Ships and for Pollution Prevention, as required by the International Convention for the Safety of Life at Sea,
1974. We obtained a Document of Compliance for oil tankers, chemical carriers, bulk carriers, gas carriers,
passenger vessels and other cargo vessels, namely offshore specialized vessels that is valid through 2012. We
renewed our certificate for liner and offshore vessels in February 2006 and it is valid until 2011.

We are also an active member of the United Nations Global Compact (UNGC). The UNGC is a strategic policy
initiative for businesses that are committed to aligning their operations and strategies with ten universally
accepted principles in the areas of human rights, labor, environment and anti-corruption. We have adopted
policies and programs in order to adhere to the principles of the UNGC including in the following areas:

• Human Rights: We are focused on the protection of human rights. We follow policies that protect the
human rights of employees and other stakeholders. We have a well-defined Citizens’ Charter and
Public Grievances Redressal Procedure and rights to information to aid and assist stakeholders.

• Labor: We see our human resources as our most valuable asset and have strived to provide safe and
healthy working conditions. We follow the Government guidelines with regard to reservation of
employment for special classes of employees. As of September 30, 2010, approximately 30.0% of our

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workforce is hired from these categories. In addition, we are committed to gender equality as evidenced
by the fact that approximately 18.0% of our shore cadre is comprised of women.

• Environment: We are committed to conducting our business in a responsible manner and believe in
establishing sustainable systems to protect the environment in accordance with international
conventions for the prevention of pollutions from vessels. Our efforts in this area are evidenced by the
following: (i) all our vessels are marine pollution, or MARPOL (the International Convention for the
Prevention of Pollution From Ships), compliant and hold valid International Oil Pollution Prevention
Certificates; (ii) each vessel holds a valid International Sewage Pollution Prevention Certificate and
International Air Pollution Prevention certificate; (iii) our vessels have garbage management plans; (iv)
we have developed an in-house manual known as “HAZMAT” which sets forth our policies and
practices in respect of carriage of hazardous and dangerous goods; and (v) we ensure that newly
acquired vessels are in full compliance with stringent international regulations on environmental
friendly technologies. In additional, all of our vessels meet NOx compliance standards, and we are
constantly committed to minimize air and oil pollution.

Business in Sanctioned Countries and Interest in Irano-Hind

The United States has certain laws and regulations, or U.S. Economic Sanctions Laws, that impose restrictions
upon U.S. persons, and, in some contexts, foreign entities and persons, with respect to activities or transactions
with or for the benefit of certain countries, governments, entities and individuals that are the subject of U.S.
Economic Sanctions Laws (“Sanctions Targets”). Many, but not all, of U.S. Economic Sanctions Laws are
administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”).

We have engaged and continue to engage in business with counterparties, including government-owned or
controlled counterparties that are Sanctions Targets, including counterparties in Iran and Sudan. Our tankers are
out chartered to certain third parties, and through these charter arrangements transport crude oil from Iranian and
Sudanese oil terminals to India. In Fiscal Years 2008, 2009 and 2010, we derived approximately Rs. 721.2
million, Rs. 1,860.9 million and Rs. 1,160.3 million in income from this business, or 1.8%, 4.1% and 3.0%,
respectively, of the Company’s total income. Although Libya is no longer a Sanctions Target, we have also
transported crude oil from Libya and have had dry bulk charters to and from Libya, at times when Libya was a
Sanctions Target.

In addition, our bulk carriers are from-time-to-time chartered to deliver dry bulk cargo to Iran and to transport
dry bulk cargo from Iran. In Fiscal Year 2010, we derived approximately Rs. 13.22 million in income from this
business or 0.03%, of the Company’s total income for such year. Prior to the imposition of United Nations
sanctions, our liner service also transported containers to and from Iran via feeder service from Dubai. We
derived an immaterial amount of income from this feeder service.

In addition, our bulk carriers may from time to time call on ports in Sanctions Targets. In this business, a party
not required to comply with U.S. Economic Sanction Laws may charter our bulk carriers to transport cargo to
Sanctions Targets. These Sanctions Targets have included countries in the Baltic Region, Ivory Coast and Syria.
In addition, our containerships transport container shipments between India and Myanmar via feederships to
Singapore. We also have freight forwarding agents located in the Sanctions Targets who we pay to help arrange
charters for us involving cargo from ports located there.

The Company has since 1975 held a 49.0% interest in Irano-Hind, a company also owned 51.0% by the Islamic
Republic of Iran Shipping Lines (“IRISL”). IRISL is a company whose shares are owned by the Islamic
Republic of Iran. Irano-Hind is the subject of sanctions administered by OFAC both because of the indirect
51.0% ownership by the Islamic Republic of Iran and because Irano-Hind has been identified by OFAC as an
entity engaged in the proliferation of weapons of mass destruction. Irano-Hind is also the subject of sanctions
against proliferators of weapons of mass destruction contained in a Resolution of the United Nations Security
Council. The total aggregate income received, in the form of dividends, from Irano-Hind for Fiscal Years 2008,
2009 and 2010 was approximately Rs. 19.3 million, Rs. 20.9 million, and Rs. 23.2 million, respectively, or less
than 0.10% of the Company’s total income in each such year. Since the establishment of Irano-Hind, the
Company has made no further investments in Irano-Hind, has extended no financing to Irano-Hind and has not
been involved in the operation of Irano-Hind other than to provide certain operational and management
personnel and as a minority investor. The Company has no intention of making any further investment in Irano-
Hind, or to extend any financing in the future. The Company does not anticipate that the proportion of the total

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aggregate income of the Company derived from its interest in Irano-Hind will exceed 1.0% of the Company’s
total income for the foreseeable future.

Regulatory Matters

Government and Environment Regulation

Our operations are significantly affected by a variety of Indian and international laws and regulations governing
worker health and safety and the manning, construction and operation of vessels. Our regulators have
established safety criteria and are authorized to investigate vessel accidents and recommend improved safety
standards. They also regulate and enforce various aspects of marine offshore vessel operations, including
classification, certification, routes, drydocking intervals, manning requirements, tonnage requirements and
restrictions, hull and shafting requirements and vessel documentation.

During the ordinary course of business, our operations are subject to a wide variety of environmental laws and
regulations. We have complied with existing governmental regulations which regulate the discharge of materials
into the environment, or otherwise relate to the protection of the environment. In various countries in which we
operate, including India, vessel trade or marine transportation between two ports or places within a country, is
subject to rules known as cabotage laws, which regulate maritime cabotage or coasting trade. Cabotage laws
restrict maritime cabotage to domestic flag vessels qualified to engage in the coasting trade of such country (see
below). There are similar laws in other countries in which we operate, which currently restrict our ability to
operate in those countries. Such laws also require vessels engaged in marine transportation between two points
in those countries to be owned and controlled by citizens, manned by local crew, or be locally built.

Cabotage Law in India

Part XIV of the Merchant Shipping Act imposes restrictions on vessels other than Indian vessels or vessels
chartered by (a) citizen of India; or (b) a company or body established by or under any Central or State
legislation which has a principal place of business in India; or (c) is a duly registered or deemed to be registered
cooperative society, in engaging in coasting trade of India. Such vessels are required to obtain a license from the
Directorate General of Shipping prior to engaging in the coastal trading of India. In this regard, the Directorate
General of Shipping, in the year 2002, issued the Guidelines for Grant of License to Foreign-Flag Vessels (the
“Charter Guidelines”) laying down the process for engaging foreign vessels in the Indian exclusive economic
zone of India including its territorial waters and contiguous zone. The Charter Guidelines provides that any
person who intends to charter foreign vessels for export/ import or for coasting trade or for implementation of
projects, has to submit an enquiry to the INSA, providing the details in relation to the requirement of the vessel
whereby INSA will provide an opportunity to Indian vessels to make an offer to such person submitting the
enquiry. In terms of the Chartering Guidelines, in relation to the chartering of vessels through tender process, an
Indian vessel owner who has shown the readiness to take up the job at the lowest price indicated by the foreign
flag vessels, has the right of first refusal in such bidding process.

Classification

Classification is the process of verifying vessel standards against a set of requirements set out in the rules
established by a classification society. For classification purposes, a vessel is surveyed during its construction on
the basis of design approval, tested before being taken into service and surveyed regularly during its whole
operational life until it is scrapped. Every vessel’s hull and machinery must be classed by the classification
society authorized in such vessel’s country or elected by such vessel’s owner. The classification society ensures
that the vessel is built, equipped and maintained in accordance with the society’s rules and regulations which,
among other things, incorporate IMO convention requirements with regard to safety and pollution. The class
certificate is valid for five years, subject to periodic inspections. The following surveys are carried out by a
surveyor of the classification society: annual survey, which is carried out yearly; intermediate survey, which is
carried out every 2.5 years and can be carried out in a vessel’s second or the third year; and renewal or special
survey, which is carried out once every five years. This survey may be commenced at the fourth anniversary
after the previous survey and progressed during the year with a view to completion by the fifth anniversary.
Vessels are also required to be drydocked twice during the special survey period for inspection of underwater
parts. The period between any two drydocking must not be more than 36 months, unless the vessel qualifies for
and undergoes an in-water survey.

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Depending upon the type and age of a vessel and quality of ongoing maintenance, the scope of survey can range
from a standard inspection to a more stringent enforcement such as steel thickness measurement. Defects found
at such inspection have to be repaired to the satisfaction of the classification society before the vessel is allowed
to be further used. In cases of older vessels where more wear and tear is typical, substantial amount of money
may have to be spent for steel renewal or other repairs to comply with the rules of a classification society and
for the vessel to be maintained under classification.

Competition

We operate in a highly competitive industry. Competition in our industry primarily involves factors such as (i)
quality and capability of vessels; (ii) ability to meet the customer’s requests and schedules; (iii) safety record;
(iv) experience and professional reputation; and (v) price.

We have numerous competitors in each of the geographical regions in which we operate, ranging from
international companies that operate in many regions to smaller local companies that typically concentrate their
activities in one specific region. Local companies in the countries in which we operate may have more domestic
experience and better relationships with clients than we do. Such companies may also have an advantage over us
as many governments favor, or effectively require contracts to be awarded to, local contractors or require
foreign contractors to employ citizens of, or purchase supplies from, a particular jurisdiction. Such policies may
affect our ability to compete. We also compete with larger and financially stronger operators in India and
worldwide who may have greater brand recognition than us.

Despite the competitive environment in which we operate, we believe that our operating capabilities and long
standing reputation enable us to compete effectively with other fleets in the market areas in which we operate. In
particular, we believe that the acquisition of new and technically-advanced vessels, our ability to manage our
vessels with lower operating costs, and our established reputation as a reliable provider of services provide us
with a competitive advantage.

Personnel and Administration

The personnel and administration division oversees functions such as recruitment, employee relations, human
resources development, public relations, maintenance of properties and general office services. The personnel
and administration division also negotiates and manages the relationship between the labour unions representing
our employees. We also have a training institute, the Maritime Training Institute (M.T.I.), which carries out the
training of our fleet and shore personnel.

We have a highly skilled and diverse workforce comprising of 979 personnel on shore as of September 30,
2010. Our personnel include master mariners, marine engineers, naval architects, business graduates,
accountants, computer specialists and many other skilled professionals.

The following table sets forth our personnel on board as of September 30, 2010:

Rank Main Fleet Offshore Vessels


Officer posts on board 939 296
Petty officer posts on board 336 51
Crew posts on board 1,537 216
Regular officers on roster 1,664 104
Regular petty officers on roster 360 76
Regular crew on roster 176 129
Contract officers placed onboard vessels 106 201
Contract petty officers placed onboard vessels N/A 6
Contract crew 1,796 167
Total 6,914 1,246

The following table sets forth the statistics regarding our personnel on shore as of September 30, 2010:

Location Officers Staff Total


Mumbai 643 128 762
Delhi 7 4 12
Kolkata 97 45 147

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Chennai 41 10 52
London 2 0 2
Joint Ventures (Irano-Hind) 4 0 4
Ship Yard 3 0 3
Total 797 187 982

We provide our employees with periodic training and development to assist them in acquiring the knowledge
and skills necessary for the performance of their respective functions. In 1988, we commissioned the Maritime
Training Institute (M.T.I) which is our in-house training facility for the development of skills critical to our
operations. M.T.I is also a branch of the World Maritime University of Malmo Sweden. M.T.I trains seafarers in
entry and advanced level Seafarers’ Training, Certification and Watchkeeping Code (STCW) courses. M.T.I.
also conducts domestic and international seminars and conferences for the maritime industry. In addition to
meeting the training demands of our Company, M.T.I designs custom made courses on demand for various
companies and government entities. M.T.I also trains approximately 200 pre-sea cadets per year in courses
affiliated with the Indian Maritime University. In Fiscal Year 2010 M.T.I. conducted 318 courses for a total of
13,289 total man days trained covering both Company and third party students. Training courses of pre-sea
cadets is required in order to meet fleet manning requirements and to achieve certain tonnage tax benefits.

Our Company from time to time experiences shortage of employees in both on board and on shore personnel as
a result of attrition. Our Company has attempted to address this through a combined effort of hiring young
professionals at the junior and middle management levels and campus recruitment at the Indian Institute of
Management, Indian Institute of Technology, and other professional institutes. In Fiscal Year 2010, we hired 46
professionals at various junior and middle management positions. In Fiscal Year 2010 we faced a shortage of
management level nautical and engineer officers. However, we have worked to address through recruitment,
training, and adjustment of salaries to market standards.

Our onshore personnel are members of one of the following, SCI Officers’ Association Mumbai, SCI Officers’
Association Kolkata, SCI Staff Union Mumbai, Employees’ Union Kolkata, and SCI Non-Clerical Employees’
Union Kolkata. Our fleet personnel are members of one of the following three unions, namely, Maritime Union
of India (MUI), National Union of Seafarers of India (NUSI) and Forward Seamans’ Union of India (FSUI). As
of September 30, 2010, we have entered into negotiations with the representative labor bodies for our onshore
personnel regarding an impending wage revision.

Insurance

The operation of our vessels includes risks such as mechanical failure, collision, piracy attack, property loss,
cargo loss or damage and business interruption due to political circumstances in India or foreign countries,
hostilities and labor strikes. In addition, there is always an inherent possibility of marine disaster, including oil
spills and other environmental mishaps, and the liabilities arising from owning and operating vessels in
international trade. We believe that our fleet is covered with adequate insurance and with reasonable deductibles
and limits on coverage, which are normal for the type of assets and operations to which they relate. While we
believe that our insurance coverage will be adequate, not all risks can be insured, and there can be no guarantee
that any specific claim will be paid, or that we will always be able to obtain adequate insurance coverage at
reasonable rates. See the Risk Factor titled “We may not have adequate insurance and we are subject to
uninsured risks”.

Information Technology

We believe that a material factor in the success of our operations is the ability of our divisions, employees, and
agents to securely and effectively communicate with each other through the use of information technology.
Accordingly, we are committed to consistently enhancing our companywide information technology systems
which would improve the work efficiency, enhance the business through better customer support and help the
management to take well informed decisions.

In October 2006 (Phase I) and January 2008 (Phase II), we entered into an agreement with Tata Consultancy
Services (TCS) to study and supervise the upgrade of our major information technology systems. The resulting
SCI Enterprise Transformation through Information Technology (SET-IT) project seeks to implement a
comprehensive and integrated enterprise resource planning (ERP) system using various systems such as SAP,
Danaos and AFSYS across all divisions which will provide us with greater security, reliability and efficiency in
major areas of our operations, including container management, freight booking and reconciliation, spare part

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management, agents account management, bunkering, vessel scheduling, dry docking, repair management, crew
management, payroll and billing. When fully implemented, the enhanced information technology system will
permit integrated communication with our network of more than 70 agents worldwide. In connection with this
project, TCS is the program manager supervising the works of consultants, including those from other vendors
such as M/s. SAP India, M/s. Danaos Management Greece, M/s. Information Dynamics Dubai and M/s. Wipro
whose software and hardware will be implemented as part of SET-IT. A state of the art data centre well
connected to all locations once SET-IT fully operational. Due to the size and complexity of this project, this
ERP implementation has been conducted in various phases, some of which have been completed as of
September 30, 2010. We anticipate that this system implementation will be substantially completed in the fourth
quarter of Fiscal Year 2011. We are in the process of training our employees and agents on the use of the
integrated system. See Risk Factor “Any disruptions in our implementation plans to our new SCI Enterprise
Transformation through Information Technology (SET-IT) project could have a material adverse effect on our
ability to carry on our business efficiently.”

Our Offices and Properties

Our registered office is located at Shipping House, 245 Madame Cama Road, Mumbai 400 021, which is owned
by our Company. We also own properties in other parts of Mumbai, Kolkata and Haldia totaling approximately
378,864 square feet. We also occupy leased properties in Mumbai, Chennai, Kolkata, Delhi and London totaling
approximately 9,935in square feet.

Awards

We have received numerous awards and accolades from various national and international organizations for
excellence in customer satisfaction and operation efficiencies, human resource training, environment
consciousness, safety and emergency preparedness. These awards include:

• A “Navratna” company with an Ir AAA rating which is the highest corporate rating from ICRA.

• Awarded “Excellent” rating under the Memorandum of Understanding with the Government for 18
consecutive years.

• Multiple Loyds Awards for best container shipping from India to the U.K.

• Conferred Mini Ratna status in 2000.

• Winner of the “Best International Solution” award at the 3rd Annual HSBC Global Payments and
Cash Management Partnership Awards.

• The Most Compassionate Employer of Indian Seafarers’ at 43rd National Maritime day celebration in
April 2006.

• Vessel ‘m.v. Tamilnadu’ was chosen for the ‘Ship of the Year’ award at 43rd National Maritime Day in
April 2006.

• “Dun & Bradstreet – American Express Corporate Award 2006” in the Shipping and Logistics Sector
in August, 2006.

• Winner of the Seatrade Middle East and Indian Subcontinent Award 2007 in the category of the “Ship
Owner/ Operator”.

• Selected by the international shipping newspaper ‘Lloyd’s List’ for Lloyd’s List Middle East and
Indian Subcontinent Award 2007 in the category of “Ship Owner of the Year”.

• “Deal of the Year 2008” award at the India Shipping Summit 2008 in September, 2008.

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REGULATIONS AND POLICIES IN INDIA

The following description is a summary of certain laws and regulations in India which are applicable to us. The
information detailed in this chapter has been obtained from publications available in the public domain. The
regulations set out below are not exhaustive, and are only intended to provide general information to the
investors and are neither designed nor intended to be a substitute for professional legal advice.

Maritime laws

Shipping is an international activity and is required to conform to various international regulations, treaties,
conventions and other similar bilateral and multilateral agreements. India is a party to several conventions
developed by the IMO and the United Nations Organisation and the ILO. The ILO also develops conventions
and recommendations relating to the working conditions of seafarers, their safety, identity and other welfare
measures for the seafaring community at large. To give effect to the requirements of such conventions, suitable
statutory provisions have been made in the Merchant Shipping Act, 1958 (“Merchant Shipping Act”). The
Merchant Shipping Act is also suitably amended as per the requirements of the conventions for giving statutory
authority for the implementation of the provisions of these conventions.

The Merchant Shipping Act

The Merchant Shipping Act was enacted with an objective to foster the development of an Indian mercantile
marine legislation to serve national interests and to establish a National Shipping Board for the registration of
Indian ships and generally to amend and consolidate the law relating to merchant shipping. The Merchant
Shipping Act is the principal legislation that applies to ships that are registered in India or which are required to
be registered under this statute. It closely follows international maritime law. The Merchant Shipping Act
provides for, among other things, regulations governing the transfer, mortgage and sale of ships, certification of
competency of the officers, engagement and discharge of seamen, payment of wages to seamen, health and
accommodation of seamen, the duties of the shipping masters, agreements with the crew, disputes between
seamen and employers, inspection by shipping master of provisions, accommodation on board and a certificate
of survey for passenger carrying ships. In addition, with a view to ensure safety of the vessels, the Merchant
Shipping Act makes it compulsory to install life saving appliances, fire appliances as well as radio telegraphy,
radio telephony and direction finder. The Merchant Shipping Act also contains provisions relating to safety and
space requirements of unberthed passenger ships. The statute also sets out the requirements in relation to the
following, among other things, dangerous goods and grain cargoes, collisions, accidents at sea and limitation of
liability, wreck and salvage, and weights and measures on board. The Merchant Shipping Act also contains
special provisions for control of Indian ships and other ships engaged in coasting trade.

Registration of Indian ships

Every Indian seagoing ship fitted with a mechanical means of propulsion (except a ship with mechanical means
of propulsion of less than 15 tons net and employed solely in the coasts) is required to be registered under the
Merchant Shipping Act. A ship entitled to fly the flag of a country needs to be registered in that country. The
object of registration is to ensure that persons who are entitled to the privilege and protection of the Indian flag
are able to obtain the privilege and protection. The registration affords evidence of title of the ship to those who
deal with the property in question. It also gives protection to the members of the crew in case of casualties
involving injuries and/or loss of life to claim compensation under the provisions of the Indian acts in Indian
courts. A ship is not recognised as an Indian ship unless it is owned wholly by: (a) citizen of India; or (b) a
company or body established by or under any Central or State legislation which has a principal place of business
in India; or (c) is a duly registered or deemed to be registered cooperative society. An Indian ship which is
required to be registered under the Merchant Shipping Act and which is not so registered, is not recognised as an
Indian ship. The Merchant Shipping Act provides a list of ports at which the registration of ships can be done.
An application for the registry of an Indian ship under the Merchant Shipping Act is followed by a survey of the
ship in relation to its tonnage, build and other particulars. Further, the person to be registered as the owner of the
ship is required to submit a declaration of ownership in the prescribed format. All Indian ships are required to
obtain a license from the DG Shipping, before they are taken to sea from the port or place within or outside
India.

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Cabotage

Part XIV of the Merchant Shipping Act imposes restrictions on ships other than Indian ships or ships chartered
by (a) citizen of India; or (b) a company or body established by or under any Central or State legislation which
has a principal place of business in India; or (c) is a duly registered or deemed to be registered cooperative
society, in engaging in coasting trade of India. Such ships are required to obtain a license from the Directorate
General of Shipping prior to engaging in the coastal trading of India. In this regard, the Directorate General of
Shipping, in the year 2002, issued the Guidelines for Grant of License to Foreign-Flag Vessels (the “Charter
Guidelines”) laying down the process for engaging foreign vessels in the Indian exclusive economic zone of
India including its territorial waters and contiguous zone.

Seamen and Apprentices

Specific provisions in relation to the engagement, discharge and related matters pertaining to seamen and
welfare of Seamen and Apprentices are contained under the Merchant Shipping Act. Seamen are required to be
registered with the Director, Seamen’s Employment Office. There are prescribed rules and regulations in
relation to the maintenance of discipline on board of the ships. The safety and welfare of the seamen is regulated
by the provisions of the Merchant Shipping Act. The Merchant Shipping Act, inter alia, contains the provisions
in relation to the engagement of seamen on Indian ships and ships other than Indian ships at any port in India.
The Merchant Shipping Act also sets out special provisions with regard to agreements with crew of Indian ships.

Directorate General of Shipping (“DG Shipping”)

The DG Shipping is vested with statutory powers under Section 7 of the Merchant Shipping Act. The DG
Shipping has the power to make rules in relation to maritime administration. The DG Shipping deals with the
matters concerning implementation of shipping policy and legislations, prevention of marine pollution,
promotion of maritime education and training in co-ordination with the international maritime organisation,
regulation of employment and welfare of seamen development of coastal shipping, augmentation of shipping
tonnage, examination and certification of merchant navy officers, supervision and control of the allied
departments and officer under its administrative jurisdiction. The DG Shipping may from time to time make
rules and notify circulars as part of the administration of various matters related to shipping. As part of our
operations, we are required to comply with such rules, circulars and notifications made by DG Shipping from
time to time, as applicable.

Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976 (the
“Territorial Waters Act”)

The Territorial Waters Act empowers the Government to extend the application of any Central Government
legislation to the territorial waters, continental shelf, exclusive economic zone and other maritime zones of
India. Accordingly, the Territorial Waters Act provides for the grant by way of licenses or letter of authority by
Government of India to explore and exploit resources of the continental shelf and exclusive economic zones.

The Seamen’s Provident Fund Act, 1966 and the Seamen’s Provident Fund Scheme

The Seamen’s Provident Fund Act, 1966 regulates, among other things, the institution of a Seamen’s Provident
Fund which has been established by the Government pursuant to the Scheme framed under the said Act. The
Scheme provides for, among other things, matters relating to fund contribution, administration thereof,
payments and withdrawals. The Act applies to any owner of a ship, his agent thereof or the master of a ship for
contributing to the Seamen’s Provident Fund.

Insurance

Marine Insurance Act, 1963

The Marine Insurance Act, 1963 (“MI Act”) provides that the insurer shall undertake to indemnify the assured
against the losses incidental to marine adventures. It is extended to protect the assured against any losses on
inland waters or any land risk which may be incidental to any sea voyage. Further, it requires that the assured
must be interested in the subject-matter at the time of the loss. In the event, the assured has no interest at the
time of loss, such person could not acquire interest by any act or election after the assured person becomes

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aware of the loss. It is essential that the contract of marine insurance is embodied in the marine policy and such
policy must be executed and issued either at the time when the contract is concluded or subsequently. The MI
Act provides that the assured can avail different types of insurance including voyage policy, time policy, valued
or unvalued policy, floating policy by ships and others.

Environmental Laws

The Environmental Protection Act, 1986, Water (Prevention and Control of Pollution) Act, 1974 and the Air
(Prevention and Control of Pollution) Act, 1981 provide for the prevention, control and abatement of pollution.
Pollution Control Boards (“PCBs”) have been constituted in all the States in India to exercise the authority
provided under these statutes for the purpose of preventing and controlling pollution. Companies are required to
obtain approvals of the relevant State PCBs for emissions and discharge of effluents into the environment. The
Hazardous Waste (Management and Handling) Rules, 1989 include waste oil and oil emulsions under the
definition of hazardous wastes and impose an obligation on every occupier and operator of a facility generating
hazardous waste to dispose of such hazardous wastes properly including proper collection, treatment, storage
and disposal. Every occupier and operator of the facility generating hazardous waste is required to obtain an
approval from the PCB for collecting, storing and treating the hazardous waste.

Labour Legislations

As part of our operations, we are required to comply from time to time with the laws, rules and regulations in
relation to the hiring and employment of labour. Labour legislation in India classifies persons into ‘employees’
and ‘workmen’ based on factors which, among others, include the nature of work and remuneration. While
workmen are typically entitled to various statutory benefits including gratuity, bonus, retirement benefits and
insurance protection, employees are governed by the terms of their employment contracts. The following is an
indicative list of legislations which are applicable to our operations and workmen:

• Minimum Wages Act, 1948


• Contract Labour (Regulation and Abolition) Act, 1970
• Payment of Bonus Act, 1945
• Payment of Gratuity Act, 1972
• Employee State Insurance Act, 1948
• Employees Provident Fund and Miscellaneous Provisions Act, 1952
• Workmen’s Compensation Act, 1923
• Industrial Disputes Act, 1947
• Industrial Employment (Standing Orders) Act, 1946

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HISTORY AND CERTAIN CORPORATE MATTERS

Our History

Our Company was incorporated as Eastern Shipping Corporation Limited on March 24, 1950 under the
Companies Act, 1913. With effect from October 2, 1961, Western Shipping Corporation Limited was
amalgamated with our Company under the Shipping Corporations Amalgamation Order, 1961, issued by the
Government of India. The name of our Company was changed from Eastern Shipping Corporation Limited to
The Shipping Corporation of India Limited on October 21, 1961. Subsequently, for the purpose of listing in
1992, our Company was changed from a private company to a public company and received a fresh certificate
of incorporation on February 18, 1993.

Our Company’s business is owning and operating ships. For further details in relation to our business including
description of our activities, services, market of each segment, our growth, research and development,
managerial competence and capacity build-up, our standing with reference to our prominent competitors, see
“Business” and “Management’s Discussion of Financial Conditions and Results of Operational” beginning on
pages 94 and 198 respectively.

Changes in the Registered Office of our Company

At the time of incorporation, our registered office was situated at Steelcrete House, 4th floor, Dinshaw Wacha
Road, Bombay 400 020. Our registered office was shifted from Steelcrete House, 4th floor, Dinshaw Wacha
Road, Bombay 400 020 to our present address at Shipping House, 245, Madame Cama Road, Mumbai 400 021 in
August, 1973. The change in the registered office was for administrative and operational efficiency.

Main Objects of our Company

Our main objects that enable us to carry on our business, as contained in our Memorandum of Association are as
follows:

I. To purchase, charter hire or otherwise acquire, sell exchange, let or charter either in India or in any
other country or otherwise deal with steam and other ships or vessels, of any description with all
equipment and furniture, and to establish maintain and operate transport services by water and land
between India and other countries of the world for the conveyance of passengers, mails and freight and
for any other purpose including the conveyance of troops, carriage of munitions of war, live-stock, corn
and other produce, all merchandise and food articles of whatsoever nature or kind between such Ports
and places in any part of the world as may seem expedient, also to acquire or obtain any postal and/or
other subsidy etc., and generally to establish, maintain and operate lines, or regular services of
steamships or other vessels propelled by power or otherwise, on such trades routes and services as may
be allotted to the Company by the Government of India.

II. To purchase, take in exchange or otherwise acquire any share or interest in ships, vessels or craft of any
description and also shares, stocks and securities of any companies possessed of or interested in any
ships or vessels or craft.

III. To construct, purchase, own, maintain repair, refit, replace, restore, sell or dispose of engines, boilers,
machinery, component parts, accessories and fittings, required for ships or vessels of any description or
kind.

IV. To buy, sell prepare for market and deal in rice, cotton, jute, coal timber, oils, lubricants, petrol, fuels
of all descriptions, live stocks, meat and other merchandise, commodities and produce either for
freighting ships and vessels of the Company or any other purpose.

V. To carry on the business of merchants, carriers by land and water, ship-owners, ship agents, dock
owners, warehousemen, wharfingers, barge owners, lightermen, forwarding agents, stevedors,
bunkerers and ice merchants and refrigerating storekeepers, and of hotel owners and bus owners in
furtherance of or in connection with their business of carriers by land and sea and provide facilities for
the carrying on of any of the above business.

VI. To carry on the business of shipbuilders and repairers and refiners and vendors of ships and vessels

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and/or repairers of engines, boilers, machinery and any other parts required for ships and vessels and to
instruct and maintain for the use of the Company or for letting out on hire or for doing repair or other
work for others graving and other docks and other conveyances for the building, repairing or docking of
ships and other vessels and to aid in or contribute to the construction of any such works.

VII. To purchase, take on lease or acquire in exchange or in amalgamation, license or otherwise solely or
jointly with others, equip and fit up with all plant, machinery, equipment, appliances and accessories,
yards, factories, or works for maintaining and operating building, repairing, equipping and stationing
steamers, ships, vessels, launches and boats.

VIII. To maintain, operate, renew, replace, repair, improve, alter, break, sell, exchange or let out on hire or
charter load on commission or otherwise use, utilise, deal with and dispose of any ships and vessels.

IX. To demolish, erect, construct, enlarge, alter, replace, repair, or maintain factories, buildings, and
structures of every kind necessary or convenient for the Company's business.

X. To manufacture, make and deal in metal, wood and any other products, substances, articles, and things
of every description and kind.

XI. To purchase, take on lease, licences or concessions or in exchange or obtain assignment of or


otherwise acquire lands of every description and tenure, building works, plantations, forests, licences,
leases and any rights and privileges or interest therein for establishment maintenance and working of
lines of steamships or vessels between any ports of the world or for the formation or working of any
railway, tramway, wharf, quay, jetty, pier, dock or other works, and to explore, work exercise, develop
and to turn to account and to sell, assign, transfer or otherwise deal with or dispose of the same
together with the benefit of any subsidy attached to any such licence or concession or otherwise.

XII. To apply for, purchase or by any other means acquire and protect, prolong and renew any patents,
patent rights, brevets d' invention, licences, protections and concessions which may appear likely to be
advantageous or useful to the Company and to use and turn to account and to manufacture under or
grant licences or privileges in respect of the same and to spend money in experimenting upon and
testing and improving or seeking to improve any patents, inventions or rights which the Company may
acquire or propose to acquire.

XIII. To buy, sell, let on hire, repair, alter and deal in machinery, components parts, accessories and fittings
of all kinds.

XIV. To manufacture, buy sell, exchange, install, work, alter, improve, import or export and otherwise deal
in all kinds of plant, machinery, vehicles, apparatus, tools, utensils, substances, materials and things
necessary or convenient for carrying on any of the business which the Company is authorised to carry
on or usually dealt in by persons engaged in such businesses.

XV. To carry on business as manufacturers, sellers, purchasers, importers or exporters and dealers in boats,
barges, launches, steamers, trucks, chassis, rolling stock, motors, carriages, buses, lorries, engines, and
turbines whether propelled or moved by electricity, steam, oil, gas, petroleum or any other motive or
mechanical power and all components parts, fittings, tools, implements, accessories, materials for use
in connection therewith.

XVI. To insure the steamships, vessels and other property of the Company and to effect all such insurances
in relation to the carrying on of the Company's business and any risk incidental thereto as may seem
expedient and if thought fit, to join or become a member of any mutual insurance company or to carry a
part of-the whole of such insurance risk in connection with the Company's business.

XVII. To act as agents or Managing Agents of any company carrying on or about to carry on any business
which this Company is authorised to carry on.

XVIII. To promote any company or companies subsidiary or otherwise for the purpose of acquiring all or any
of the property, rights, and liabilities of this Company or for carrying on any business which this
Company is authorised to carry on or for any other purpose which may seem directly or indirectly

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calculated to benefit this Company or to promote or advance the interests of this Company, and to pay
and meet the cost of and incidental to such promotion.

XIX. To grant loans on ships, vessels, or on goods and merchandise carried or to be carried on any vessels of
the Company.

XX. To sell or sublet any concession or licence obtained or contract entered into.

XXI. To buy or otherwise acquire ships and vessels of every description complete or not complete, sound or
out of repair for the purpose, of improving reselling, letting out on hire or otherwise making a profit out
of the same.

XXII. To carry on any other business which may seem to the Company capable of being conveniently carried
on in connection with the above or calculated directly or indirectly to enhance the value of or render
profitable any of the Company's property or rights.

XXIII. To undertake the salvage and towage of ships, crafts, cargoes and property and to levy cranages,
anchorage, lighting and other dues and tolls and render assistance to ships and vessels in distress.

XXIV. To carry on the activities connected with off-shore exploration and production of oil, minerals, gas and
other related areas as well as logistic support thereto.

XXV. To acquire and deal with the following property:

a) The business property and liabilities of any company firm or person carrying on any business within
the objects of the Company.

b) Lands, buildings, easements and other interests in immovable property.

c) Plant, machinery personal estate and effects.

d) Patents, patent rights, inventions or designs.

e) Shares, stocks or securities in or of any shipping company ship-repairing company or any company
carrying on or entitled to carry on business of building or manufacturing steamers, vessels, ships,
tankers, or in or of any company carrying on any business which this Company is entitled to carry
on or of any other company or undertaking the acquisition of which may seem likely or calculated
directly or indirectly to promote or advance the interest of the Company or be advantageous or
beneficial to the Company and to continue to hold any shares in any such company heretofore
acquired by the Company and to sell or dispose of and transfer any such shares, stocks or
securities.

f) To purchase, take on lease or acquire in exchange or under amalgamation, licence or concession or


otherwise, absolutely or conditionally solely or jointly with others any property, rights or
privileges which the Company may think necessary or convenient for the purposes of its business,
and make, construct, maintain, work, hire hold, improve alter, manage, let, sell, dispose of
exchange, carry out or control roads, canals, water courses, ferries, piers, wharves, quays, sheds,
landing places, garages, accommodation of ail kinds of sea and land traffic, water ways, lands,
buildings, pipe lines, foundries, warehouses, works, factories, workshops, sidings, tramways,
engines, machinery and apparatus, electric works, water rights, way leaves, privileges or rights of
any description or kind and other conveniences, which may be calculated directly or indirectly to
advance the Company's interest and to contribute to subsidise or otherwise assist or take part in the
construction, improvement, maintenance, working, management, carrying out or control thereof.

XXVI. To perform or do all or any of the following operations, acts or things:

a) To pay all the costs, charges and expenses of the promotion and establishment of the Company.

b) To sell, let, dispose of or grant rights over all or any property of the Company.

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c) To erect buildings, factories plant and machinery for the purposes of the Company.

d) To undertake payment of all rents and performance and observance of all covenants, conditions
and agreements combined in or reserved by any lease or leases which may be granted or assigned
to or may be otherwise acquired by the Company.

e) To manufacture plant, machinery, tools goods and things for any of the purpose of the business of
the Company.

f) To draw, accept and negotiate bills of exchange, promissory notes and other negotiable
instruments.

g) To borrow money or to receive money on deposit either without security or secured by debentures,
debenture stock (perpetual or terminable), mortgage or other security charged on the undertaking
or all of any of the assets of the Company including uncalled capital.

h) To lend money on property or on mortgage of immovable property or on hypothecation or pledge


of movable property and to invest money of the Company in such manner (other than in the shares
of this Company) as the Directors think fit and to sell, transfer or deal with the same.

i) To enter into partnership or into any arrangement for joint working, sharing or pooling profits,
amalgamation union of interests, co-operation, joint adventure, reciprocal concession, or otherwise
or amalgamate with any person or company carrying on or engaged in or about to carry on or
engage in any business or transaction which this Company is authorised to carry on or engage In,
or any business undertaking or transaction which may seem capable of being carried on or
conducted so as directly or indirectly to benefit this Company.

j) To sell or dispose of the undertaking of the Company and all or any of the property or effects of
the Company for cash or for stock, shares, securities of any other company or for other
consideration as the Company may think fit and in particular for shares, debentures or securities of
any other company having objects altogether or in part similar to those of this Company.

k) To establish, provide, maintain and conduct or otherwise subsidise research laboratories and
experimental workshop of scientific and technical research and experiments; to undertake and
carry on scientific and technical researches, experiments and tests of all kinds; to promote studies
and researches, both scientific and technical, investigations and inventions by providing
subsidising, endowing or assisting laboratories, workshops, libraries, lectures, meetings and
conferences and by providing or contributing to the remuneration of scientific or technical
professors or teachers and by providing or contributing to the award of scholarships, prizes, grants
to students or otherwise and generally to encourage, promote and reward studies, researches,
investigations, experiments, tests and inventions of any kind that may be considered likely to assist
any business which the Company is authorised to carry on.

l) To establish, maintain, operate and support or Joint in establishing, maintaining, operating and
supporting training colleges for ships officers, navigators, marine engineers, ship-building
architects, radio operators, technicians and mechanics, and schools and colleges for (raining in
navigation, ship-building and repairing in all branches of marine navigation and' engineering in
India or in any part of the world and to enter into any arrangement with Government of any other
party for that purpose.

m) To obtain apply for, arrange for the issue or enactment, of Order or Act of Legislature or Act of
Authority in India, England or any other part of the world for enabling the Company to obtain
powers, authorities, protection, financial and other help necessary or expedient to carry out or
extent any of the objects of the Company or for any other purpose which may seem expedient and
to oppose any proceedings or applications or any other endeavours steps or measures which seem
calculated directly or indirectly to prejudice the Company's interests.

n) To enter into any arrangement with the Government of India, Government of U.K. or with any
other Government or State or any local or provincial government or with authorities imperial
supreme, national, local, municipal or otherwise or with any rulers, chiefs, landholders or with any

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person for the purpose of directly or indirectly carrying out the objects of the Company or any of
them or effecting any modification in the constitution of the company or furthering the interests of
the Company or its members and to obtain from any such Government, State, authority or person
any charters, subsidies, loans, indemnities, grants contracts, decrees, rights, sanction, privileges,
licences or concessions whatsoever (whether statutory or otherwise) which the Company may
think it desirable to obtain and carry out, exercise and comply with any such arrangements,
charters, grants, contracts, decrees, rights, sanctions, privileges, licences, or concessions and the
terms and conditions arid in particular to comply with any conditions for the sharing of profits of
the Company with any such Government, State, authority or person or for restricting dividends on
shares of the Company.

o) To establish, maintain, manage and operate restaurants, refreshment rooms, buffets, cafeterias and
hotels and to carry on the business of general provision merchants, licensed victuallers, wine and
spirit merchants and tobacconists.

p) To provide for the amelioration and welfare of persons employed or formerly employed by the
Company and the wives, families, dependents or connections of such persons by building or
contributing to the buildings of houses, dwellings or chawls or by grants of money, pensions,
allowances, bonuses or other payments or by creating and from-time to time subscribing or
contributing to Provident Fund and other Associations, Institutions, Funds or Trusts or by helping
persons employed by the Company to effect or maintain insurance on their lives by contributing to
the payment or otherwise and by providing or subscribing or contributing towards places of
instructions and recreation, hospitals, and dispensaries, medical and other attendance and other
assistance as the Company shall think fit.

q) To apply the assets of the Company in any way In or towards the establishment, maintenance or
extension of any association, institution or fund in or any wise connected with any particular trade
or business or with trade or commerce generally including any association, institution or fund for
the protection of the interests of masters, owners and employers against loss by bad debts, strikes,
combinations, fire, accidents or otherwise or for the benefit of any clerks, workmen or others at
any time employed by the Company or any of its predecessors in business or their families or
dependents and whether or not in common with other persons or classes of persons and in
particular of friendly co-operative and other societies, reading rooms, libraries, educational and
charitable institutions, refactories, dining and recreation rooms, churches, temples, places of
worship, schools, and hospitals and to grant gratuities, pensions, and allowances and to contribute
to any funds raised by public or local subscription for any purpose whatsoever.

r) To aid peculiarly or otherwise, any association body or movement having for an object the
solution, settlement or surrounding of industrial or labour problems or troubles or the promotion of
industry or trade.

s) To dedicate, present, subscribe to or otherwise aid out of the profits and assets of the Company
benevolent, charitable, national or other institutions or objects of a public character or which have
any moral or other claims to support or aid by the Company by reason of the locality or nature of
its operations or otherwise.

t) To make donations to any national memorial Fund or any other Fund constituted for a charitable
purpose.

u) To distribute any of the property of the Company among the members in specie or in kind but so
that no distribution amounting to a reduction of capital be made except with the sanction (if any)
for the time being required by law.

v) To transact and carry on all kinds of Agency business and to be appointed and act as Agents,
Managing Agents, Managers or Secretaries and Treasurers of any company or concern and to do
and perform all and singular the several duties, services and authorities appertaining to such offices
respectively and to comply with and to become bound by all restriction; limitations and conditions
appertaining to such offices respectively or imposed' by the terms of any agreement or agreements
entered into for any of the purposes aforesaid.

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w) To carry on any other trade or business that may seem to the Company capable or being
conveniently carried on in connection with these objects or calculated directly or indirectly to
enhance the value of or render profitable any of the Company's property or rights or which it may
be advisable to undertake with a view to improving, developing, rendering valuable or turning to
account any property moveable or immoveable belonging to the Company or in which the
Company may be interested.

x) To do all or any of the above things and all such other things as are incidental or as may be thought
conducive to the attainment of the above objects or any of them in India or at any other part of the
World, either as principals, agents, trustees, contractors or otherwise, and either along or in
conjunction with others and to do all such things as the incidental or conducive to the attainment of
the above objects.

XXVII. To do all or any of the things hereinbefore authorised either alone, or in conjunction with or as factors
trustees or agents for others or by or through factors, trustees or agents.

Amendments to our Memorandum of Association

Date Details of change


December 31, The authorised share capital of our Company was increased from Rs. 100 million to Rs. 150
1960 million.
October 2, 1961 • The name of our Company was changed from The Eastern Shipping Corporation
Limited to The Shipping Corporation Of India Limited

• The words “provided, however, that this shall not debar the Company from operating
with the consent in writing of the Scindia Steam Navigation Co. Ltd. so long as they are
the Managing Agents of the Company on any of the trades, routes and services of the,
Scindia Steam Navigation Co. Ltd., and/or their associated companies in which they
have controlling interest” were deleted from Clause 3(a) of the Memorandum of
Association of our Company, so as to be read as follows:

“To purchase, charter hire or otherwise acquire, sell exchange, let or charter either in
India or in any other country or otherwise deal with steam and other ships or vessels, of
any description with all equipment and furniture, and to establish maintain and operate
transport services by water and land between India and other countries of the world for
the conveyance of passengers, mails and freight and for any other purpose including the
conveyance of troops, carriage of munitions of war, live-stock, corn and other produce,
all merchandise and food articles of whatsoever nature or kind between such Ports and
places in any part of the world as may seem expedient, also to acquire or obtain any
postal and/or other subsidy etc., and generally to establish, maintain and operate lines,
or regular services of steamships or other vessels propelled by power or otherwise, on
such trades routes and services as may be allotted to the Company by the Government
of India.”

• The words “provided always that so long as the Scindia Steam Navigation Co. Ltd. own
a Shipyard at Vishakapatnam in the State of Madras, the Company shall not undertake
or carry on the business of a Shipbuilders except with the previous consent in writing of
the Scindia Steam Navigation Co. Ltd., which consent shall however, be required only
so long as the said Scindia Steam Navigation Co. Ltd., are the Managing Agents of the
Company” were deleted from Clause 3(a) of the Memorandum of Association of our
Company, so as to be read as follows:

“To carry on the business of shipbuilders and repairers and refiners and vendors of
ships and vessels and/or repairers of engines, boilers, machinery and any other parts
required for ships and vessels and to instruct and maintain for the use of the Company
or for letting out on hire or for doing repair or other work for others graving and other
docks and other conveyances for the building, repairing or docking of ships and other
vessels and to aid in or contribute to the construction of any such works.”

• The authorised share capital of our Company was increased from Rs. 150 million to Rs.

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Date Details of change
350 million.
January 23, The authorised share capital of our Company was increased from Rs. 350 million to Rs.
1984 1,000 million.
February 16, Clause 3(wi) was inserted in the Memorandum of Association of our Company, so as to be
1988 read as follows:
“To carry on the activities connected with off-shore exploration and production of oil,
minerals, gas and other related areas as well as logistic support thereto.”
August 29, 1991 The authorised share capital of our Company was increased from Rs. 1,000 million to Rs.
3,500 million.
September 18, The authorised share capital of our Company of Rs. 3,500 million divided into 35,000,000
1992 equity shares of Rs. 100 each was split into 350,000,000 equity shares of Rs. 10 each
September 21, The authorised share capital of our Company was increased from Rs. 3,500 million to Rs.
1995 4,500 million
July 21, 2010 The authorised share capital of our Company was increased from Rs. 4,500 million to Rs.
10,000 million

Milestones achieved by our Company since its incorporation are listed below:

Year Milestones
1950 Incorporation of Eastern Shipping Corporation Limited
1961 Merger of Eastern Shipping Corporation Limited and Western Shipping Corporation Limited and
change of name of Eastern Shipping Corporation Limited to The Shipping Corporation of India
Limited
1964 Diversification into crude oil transportation
1973 Amalgamation of Jayanti Shipping Company Limited with our Company
1975 • Acquisition of first Indian VLCC
• Our Company pioneered lighterage operations of ship to ship transfer of oil in India
• Setting up of IranoHind Shipping Company as a joint ventures in Iran
1984 Diversification into offshore supply vessels through acquisition of 10 offshore supply vessels
1986 Merger of Mogul Line Limited with our Company
1987 Our Company establishes Maritime Training Institute at Mumbai
1990/91 Execution of the first memorandum of understanding with the Government of India specifying
performance and operational targets
1991 Diversification into chemical tankers and cryogenic operations
1992 First disinvestment of 18.51% equity shares by the President of India in favour of financial
institutions, mutual funds, banks and FIIs and consequent listing on the BSE, the NSE, the CSE,
the DSE and the MSE
1993 Acquisition of 3 cellular vessels namely Lal Bahadur Shastri, Indira Gandhi and Rajiv Gandhi
1994 Second disinvestment of 3,864,600 equity shares constituting 1.37% of the paid up capital by the
President of India in favour of FIIs, Mutual Funds and banks
2000 Our Company was conferred the status of “Mini Ratna” by the Government of India, enhancing
powers for capital investment to the Board
2004 Diversification into LNG transportation through joint venture with Mitsui OSK Lines Limited,
Nippon Yusen Kabushiki Kaisha, Qatar Shipping Company QSC and Kawasaki Kisen Kaisha
Limited
2005 Acquisition of VLCC of 316,000 DWT, largest ship in India’s registry
2006 Entered into a joint venture arrangement with Forbes and Sterling Investments for operations in the
chemical tanker
2008 • Our Company was conferred the status of “Navratna” by the Government of India
• The equity share capital of our Company was increased from Rs. 2,823 million to Rs. 4,234.5
million as a result of issue of bonus issue of 1 equity share for every 2 equity shares held
• Commenced our Company’s transformation through information technology project for better
information management
2009 • Acquisition of VLCC of 321,000 DWT, largest ship in the Indian Registry
• Our Company takes over the management of two LNG carriers
2010 • Entered into a joint venture arrangement with SAIL to provide shipping related services to
SAIL for importing coking coal

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Key Awards and Recognitions

Year Name of Award


2000 Our Company was conferred Miniratna status by the Government of India
2006 • Our Company was conferred with ‘The Most Compassionate Employer of Indian Seafarers’
at 43rd National Maritime day celebration
• Our ship ‘m.v. Tamil Nadu’ was chosen for the ‘Ship of the Year’ at 43rd National
Maritime day celebration
2007 • Our Company was awarded with Seatrade Middle East and Indian Subcontinent Award
2007 in the category of the ‘Ship Owner/Operator’
• Our Company was awarded with ‘Dun & Bradstreet – American Express Corporate Award
2006’ in the shipping and Logistics Sector
• Our Company was selected by the international shipping newspaper Lloyd’s List for
‘Lloyd’s List Middle East and Indian Subcontinent Award 2007’ in the category of “Ship
Owner of the Year”
• Our Company was awarded with Best International Solution” at the 3rd Annual HSBC
Global Payments and Cash Management Partnership Awards
• Our Company was awarded with “Deal of the Year 2008" at the India Shipping Summit
2008 in September, 2008
• Our Company was awarded with “Safest & Most Environmentally Conscious Indian
Shipping Company” award at the World Maritime Day - 2009
2008 Our Company was conferred with Navratna status by the Government of India
2009 Our Company received MoU Excellence Certificate 2006-07 from Department of Public
Enterprises, Ministry of Heavy Industries and Public Enterprises, Government of India, for
excellence in achieving the MoU targets

Time and Cost Overrun

Our Company has not experienced a time or cost overrun in relation to any of its projects other than in the
normal course of business.

Strikes or Labour Unrest

Our Company has not faced any loss of time on account of strikes or labour unrest, including industrial strikes
and bandhs, in the past.

Defaults or Rescheduling of Borrowings with Financial Institutions/ Banks

There are no defaults or rescheduling of borrowings with financial institutions/ banks, conversion of loans into
equity in relation to our Company.

Our Promoter

The Promoter of our Company is the President of India acting through Ministry of Shipping, Government of
India. For details, see “Our Promoter” beginning on page 154.

Capital raising activities through equity or debt

For details regarding our capital raising activities through debt, see “Financial Indebtedness” beginning on page
225.

Our Shareholders

For details regarding our shareholders, see “Capital Structure” beginning on page 58.

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Details regarding acquisition of business/undertakings, mergers, amalgamation, revaluation of assets

1. Amalgamation of Eastern Shipping Corporation Limited and Western Shipping Corporation Limited

The Government of India through the Shipping Corporations Amalgamation Order, 1961 (“Order”) dated
October 1, 1962, issued an order for transfer of the undertaking of Western Shipping Corporation Limited
(“WSCL”) to Eastern Shipping Corporation Limited (“ESCL”) including all rights, powers, authorities and
privileges and all property, movable or immovable, profits and/or losses of WSCL with effect from October 2,
1961.

The salient features of the Order are as follows:

a) The shareholders of WSCL were to get the equivalent number of shares in ESCL as they held in ESCL.

b) The litigations, taxation and employees involving WSCL were to be transferred to our Company and
continued in the same manner and to the same extent as it would have been continued with WSCL.

c) The President of India were to make fresh appointments for the Board of Directors of our Company.

d) The provision in the MoA providing for the requirement of prior consent of Scindia Steam Navigation Co.
Ltd. by our Company before undertaking the business of shipbuilding applicable till Scindia Steam
Navigation Co. Ltd. owned a shipyard in Vishakapatnam and was the managing agent for our Company was
deleted. The authorised share capital as provided in the MoA was increased from Rs. 150 million to Rs. 350
million.

2. Amalgamation of Jayanti Shipping Company Limited with our Company

The Government of India enacted the Jayanti Shipping Company (Acquisition of Shares) Act, 1971 (“Jayanti
Act”) effective from December 23, 1971 (“Effective Date”) which repealed the Jayanti Shipping Company
(Taking Over of Management) Act, 1966. By virtue of the Jayanti Act, all shares of Jayanti Shipping Company
(“Jayanti”) were deemed to be transferred to the Central Government from the Effective Date and the total
compensation payable to the shareholders of Jayanti was stipulated at Rs. 55 million payable in proportion to
their shareholding in Jayanti payable in three instalments carrying interest at the rate of four per cent per annum
from the Effective Date. However, no director or managerial personnel specified in section 197A of the
Companies Act, 1956 or other person entitled to manage the whole or substantial part of the business of Jayanti
shall be entitled to any compensation for premature termination of any contract of management.

Pursuant to the Jayanti Act, the Government of India through the Jayanti Shipping Company Amalgamation
Order, 1973 (“Order”) dated October 18, 1972, issued for order for transfer of the undertaking of Jayanti
Shipping Company (“Jayanti”) to our Company including all rights, powers, authorities and privileges and all
property, movable or immovable, profits and/or losses of Jayanti with effect from January 1, 1973.

The salient features of the Order are as follows:

a) The shareholders of Jayanti were to get the equivalent number of shares in our Company as they held in
Jayanti.

b) The contracts, litigations, taxation and employees involving Jayanti were to be transferred to our Company
and continued in the same manner and to the same extent as it would have been continued with Jayanti.

c) The directors of Jayanti were to cease to be the directors of Jayanti from January 1, 1973.

3. Amalgamation of Mogul Line Limited with our Company

The Government of India enacted the Mogul Line Limited (Acquisition of Shares) Act, 1984 (“Mogul Act”)
effective from May 24, 1984 (“Effective Date”). By virtue of the Mogul Act, all shares of M/s Mogul Line
Limited (“Mogul”) were deemed to be transferred to the Central Government from the Effective Date and each
shareholders of Mogul was to be paid Rs. 10 per share with an interest rate of five and half per cent per annum
commencing from the Effective Date..

125
Pursuant to the Mogul Act, the Ministry of Industry (Department of Company Affairs), New Delhi issued the
Shipping Corporation of India Limited and the Mogul Line Limited Amalgamation Order dated June 26, 1986
(“Order”), vide which Mogul and our Company were directed to be amalgamation into a single company with
effect from June 30, 1986 (“Appointed Day”) and accordingly issued an order for transfer of the undertaking of
Mogul to our Company including all rights, powers, authorities and privileges and all property, movable or
immovable, profits and/or losses of Mogul.

The salient features of the Order are as follows:

a) The shareholders of Mogul were to be allotted one equity share of the face value of Rs. 100 fully paid-up
share of our Company against one hundred equity shares of Rs. 100 each of Mogul.

b) The contracts, litigations, taxation and employees involving Mogul were to be transferred to our Company
and continued in the same manner and to the same extent as it would have been continued with Mogul.

c) Every whole-time officer or other employee shall become an officer or an employee of our Company.
However, the posts of whole time directors and the secretary of Mogul shall stand dissolved from the
Appointed Day and the incumbents were to be adjusted on the same terms in our Company. Further, the
directors of Mogul including its whole time directors were to cease to be the directors of Mogul from the
Appointed Day.

d) The authorised share capital of our Company was increased to Rs. 1,000 million.

Holding Company

As on the date of this Draft Red Herring Prospectus, we do not have a holding company.

Members

As on the date of this Draft Red Herring Prospectus, we have 43,995 members in our Company.

Subsidiaries

As on the date of this Draft Red Herring Prospectus, we do not have a subsidiary.

Injunctions or restraining orders

Our Company is currently under no injunction or restraining orders.

Summary of Key Agreements

A. Our Joint Ventures

Our Company has entered into the following joint ventures/ memoranda of understanding / shareholders’
agreements where the project is at various stages of pre-qualification/ tendering/ execution. Unless extended
expressly, joint ventures at the pre-qualification/ tendering stage expire if the projects are not awarded to the
joint venture.

1. Shareholders agreement between our Company, Forbes Gokak Limited and Sterling Investment
Corporation Private Limited

Our Company has entered into a shareholders’ agreement with Forbes Gokak Limited (“Forbes”) and Sterling
Investment Corporation Private Limited (“Sterling”) (Forbes and Sterling referred to as one party unless
otherwise specified) on June 14, 2006 (“SCI Forbes SHA”) to incorporate a company by the name of SCI
Forbes Limited (“SCI Forbes”) for the purpose of acquiring new building, resale or inchartering of chemical
carriers or other vessels and providing technical and commercial management to such vessels. As per the SCI
Forbes SHA, the shareholding of the SCI Forbes shall be as follows:

• Forbes and Sterling – 50 per cent of the equity share capital of our Company;
• Company – 50 per cent of the equity share capital of our Company;

126
In terms of the SCI Forbes SHA, the parties may be required to infuse capital (in the form of loan or equity as
maybe required by SCI Forbes) in SCI Forbes as and when required by the board of SCI Forbes. In the event
any party fails to contribute within 30 days, the other party shall be entitled to buy such party’s shareholding in
SCI Forbes as per the valuation provided in the SCI Forbes SHA.

The board of SCI Forbes shall comprise of six non executive directors where each party shall have a right to
appoint three directors each. One out of the aforesaid six directors shall be non-executive chairman appointed by
different parties on rotation basis for three years. Additionally, the chief executive director shall be appointed by
the board of SCI Forbes. Every meeting of the board of SCI Forbes shall have atleast one representative of each
party.

The SCI Forbes SHA provides for certain matters which shall require unanimous consent of the board of SCI
Forbes which includes inter alia the following:

• All proposals for acquisitions, sale or disposal of a vessel;


• All proposals for financing of such acquisitions;
• Issue of shares by SCI Forbes or transfer of shares in SCI Forbes;
• Borrowing by SCI Forbes of any credit or loan facility other than the shareholders’ loan;
• Any capital expenditure or entering of any contract by SCI Forbes where the consideration exceeds Rs. 2.5
million which is not in the ordinary course of business;
• Any declaration of dividend by SCI Forbes whether interim or final.

The SCI Forbes SHA requires that the parties shall not transfer shares held in SCI Forbes (other than by way of
mortgage or pledge as required by the lenders) unless the transferee executes a deed of adherence and agrees to
take an assignment of any outstanding shareholders’ loan in proportion to the transferred shares.

In the event that (i) any resolution at the Board or the shareholders’ meeting is defeated due to lack of requisite
majority or unanimity as the case maybe; (ii) quorum is not achieved, for three consecutive meetings, then an
event of deadlock may be declared and if such deadlock is not resolved within 21 days of such declaration, then
the parties may terminate the SCI Forbes SHA by giving 30 days notice.

The SCI Forbes SHA may be terminated by either party by giving 30 days notice if the parties mutually
determine that the continuation of business of SCI Forbes is in conflict with their best interest or cessation of
SCI Forbes’ capability to satisfy its obligations in a timely manner. However, notice of 15 days is to be given if
(i) the breach of the SCI Forbes SHA continues for more than 30 consecutive days; (ii) dissolution or liquidation
(other than merger or consolidation) or assignment, cessation or abolition of the business of either Forbes or
Sterling or of our Company, or (iii) insolvency, appointment of a receiver, trustee, administrator or other similar
officer or commencement of bankruptcy proceedings, composition, reorganization or similar proceedings
against any party to the SCI Forbes SHA.

2. Shareholders Agreement dated March 26, 2004 between our Company, Mitsui OSK Lines Limited,
Nippon Yusen Kabushiki Kaisha, Qatar Shipping Company QSC and Kawasaki Kisen Kaisha
Limited

Our Company has entered into a shareholders’ agreement dated March 26, 2004 with Mitsui OSK Lines Limited
(“MOL”), Nippon Yusen Kabushiki Kaisha (“NYK”), Qatar Shipping Company QSC (“QShip”) and Kawasaki
Kisen Kaisha Limited (“K-Line”) (the “First LNG SHA”) relating to India LNG Transport Company (No. 1)
Limited and India LNG Transport Company (No.2) Limited.

MOL, NYK, K-Line and our Company, as a consortium, had bid and was successful in their bid for the
provision of two 138,000 LNG Tankers to Petronet LNG Limited for service under two time charter parties. ILT
1 and ILT 2 were incorporated to acquire, own operate and time charter one 138,000 LNG Tanker each to
Petronet LNG Limited. QShip became a party to the consortium by way of a memorandum of understanding
dated June 10, 2003.

In terms of the First LNG SHA, MOL, NYK and K-Line will provide technical expertise to our Company in
connection with the operation of LNG carriers. For the first five years, the tankers will be managed by MOL
(first vessel) and NYK (second vessel) pursuant to the management agreements to be entered between the
parties to the First LNG SHA and the management of the tanker shall be taken over by our Company. Pursuant

127
to the First LNG SHA, SCI, MOL, NYK & K-Line shall supervise the construction and completion of each
tanker.

The authorized share capital of ILT 1 and ILT 2 shall comprise of 10,000 shares each. In terms of the First LNG
SHA, the parties shall hold shares in each of ILT 1 and ILT 2 in the following manner:

• Mitsui and our Company shall hold 2,908 shares each,


• Nippon – 1,789 shares;
• QShip – 1,500 shares
• Kawasaki – 895 shares.

The boards of ILT 1 and ILT 2 shall comprise of upto 12 directors each of which MOL and the Company shall
have the right to appoint 3 directors each and NYK shall have the right to appoint two directors and QShip and
K-Line shall have the right to appoint one director each on the board of ILT 1 and ILT 2.

Certain matters shall not be given effect to without prior written consent and approval of all the shareholders of
ILT 1 and ILT 2, including, inter alia,

• sale or disposal of a tanker;


• change in authorized share capital of ILT 1 or ILT 2;
• change in the nature and scope of the business of ILT 1 and ILT 2 sale;
• transfer of disposal of the shares of ILT 1 or ILT 2;
• admission of a new shareholder to ILT 1 or ILT 2.

In the event that any shareholder of ILT 1 or ILT 2 ceases to be a shareholder, such shareholder shall no more be
bound by the terms of the First LNG SHA. Such an event shall not affect the rights and liabilities of the other
shareholders under the First LNG SHA.

SCI and MOL shall not hold less than 26% each until the expiry of the Charter party under the provisions of
Time Charter Agreement.

3. Shareholders Agreement dated December 8, 2006 between our Company, Mitsui OSK Lines Ltd.,
Nippon Yusen Kabushiki Kaisha, Kawasaki Kisen Kaisha Limited, Qatar Gas Transport Company
Ltd. and Petronet LNG Limited.

Our Company has entered into another shareholders’ agreement dated December 8, 2006 with MOL, NYK K-
Line, QGTC and PLL (the “Second LNG SHA”) relating to India LNG Transport Company (No. 3). MOL,
NYK, K-Line and our Company, as a consortium, had bid and was successful in their bid for the provision of
one 154,800 LNG tanker to Petronet LNG Limited for service under a time charterparty for a period of 25 years
from the time of delivery. For this purpose, the parties to the Second LNG SHA incorporated India LNG
Transport Company (No. 3) (“ILT 3”) incorporated under the laws of Malta.

In terms of the Second LNG SHA, K-Line and MOL, NYK if appropriate, will provide technical expertise to
our Company in connection with the operation of the LNG carrier. For the first five years, the tankers will be
managed by K-Line pursuant to the management agreements to be entered between the parties to the Second
LNG SHA and the management of the tanker shall be taken over by our Company.

The subscription for an agreegate of Ten Thousand (10000) Shares shall be made for cash by each shareholders,
so that:
• MOL and our company shall be allotted 2,600 Shares each.
• NYK shall be allotted 1,667 Shares
• K-Line shall be allotted 833 Shares
• QGTC shall be allotted 2,000 Shares
• PLL shall be allotted 300 Shares.

The board of ILT 3 shall comprise of upto 12 directors of which MOL and the Company shall have the right to
appoint 3 directors each, and NYK shall have the right to appoint two directors and K-Line shall have the right
to appoint one director on the board of ILT 3. Petronet LNG Limited itself or designee shall be entitled by notice
in writing to ILT 3 to appoint 2 directors to the board of ILT 3.

128
Certain matters shall not be given effect to without prior written consent and approval of all the shareholders of
ILT 3, including, inter alia:

• sale or disposal of the tanker;


• change in authorized share capital of ILT 3;
• change in the nature and scope of the business of ILT 3;
• transfer of disposal of the equity shares of ILT 3;
• admission of a new shareholder to ILT 3.

In the event that any shareholder of ILT 3 ceases to be a shareholder, such shareholder shall no more be bound
by the terms of the Second LNG SHA. Such an event shall not affect the rights and liabilities of the other
shareholders under the Second LNG SHA.

SCI and MOL shall not hold less than 26% each until the expiry of the Charter party under the provisions of
Time Charter Agreement.

4. Joint venture agreement with Steel Authority of India Limited

Our Company has entered into a joint venture agreement dated March 29, 2010 (“SCI SAIL JVA”) with Steel
Authority of India Limited (“SAIL”), whereby the parties have agreed to incorporate a joint venture company by
the name of SAIL SCI Shipping Company Private Limited (“JVC”) to provide various shipping and related
services to SAIL for importing coking coal and other bulk materials, and such other business like participating
in world-wide shipping trade, coastal shipping, transloading, establishing a port etc. as may be mutually agreed
by the parties from time to time.

As per the SCI SAIL JVA, the parties shall hold shares in the ratio of 50:50. Any addition to the paid up capital
shall be made by a subscription by SAIL and our Company equally which may be in the form of share capital or
shareholders loan in lieu of equity initially which may be converted into equity later. The additional need of
funds to meet working capital/ financing norms requirement of the JVC shall be met by SAIL and our Company
in accordance to their percentage of ownership of shares.

The board of the JVC shall consist of six directors, out which three directors shall be nominated by SAIL and
the remaining three shall be nominated by our Company. The chairman shall be appointed by SAIL and our
Company alternatively by rotation every two years from the nominated directors on the board. A strategic
partner can be inducted in any proportion as mutually agreed between SAIL and our Company, however such
new strategic partner shall not any time in aggregate hold more than 25% of the equity shareholding of the JVC,
and the combined shareholding of SAIL and our Company shall not at any time be less than 50% of the
aggregate subscribed and paid up equity share capital of the JVC and such shares shall be held in equal
proportions between SAIL and our Company.

The SCI SAIL JVA provides for certain matters which shall require unanimous consent of the board of the JVC
which includes inter alia the following:

• acquisition, sale or disposal of any vessel or any interest in the vessel or in the matter relating to total loss of
the vessel;
• issue of shares by JVC or changes of rights of any class or classes of shares (directly or indirectly);
approval of annual budget;
• amendment and modification to the memo and articles of the JVC;
• the selling, transferring, disposing, leasing, charging or dealing with any part (other than vessel) of the
undertaking, property, business or asses or related group of assets of the JVC exceeding Rs. 50 million;
• any addition to or other change in the nature or scope of the business of the JVC, or any relocation to
another jurisdiction or the formation of any sub by the JVC;
• any acquisition, merger, consolidation or other business combination including joint venture or entering
into any partnership or similar business arrangement by the JVC with any person or the acquisition by the
JVC of any business part of a business or assets or shares in any other corporation;
• taking long term loans for a term exceeding twelve (12) month for an amount exceeding Rs. 500 million or
obtaining shareholders loan/ bridge loan/ short term loan; or altering any material terms or condition of any
such loan.

129
Any party can transfer its shareholding in JVC to its group company by a prior consent of the other party.
Neither SAIL and our Company, or any of their group company, shall sell or otherwise transfer or dispose of
any shares or interest in any share until five years from the date of incorporation of the JVC. The board of the
JVC shall have the right to declare interim and final dividend.

The JV agreement shall stand terminated if any of the parties cease to hold any shares in the JVC. In the event of
termination of this JV agreement due to the material breach on part of one party, the other party shall have a
right to acquire the entire holding the defaulting party in JVC.

5. Joint venture agreement between our Company and Arya National Shipping Lines, Iran (now
known as Islamic Republic of Iran Shipping Lines)

Our Company has entered into a memorandum of agreement (“Irano-Hind MoA”) on December 11, 1974 with
Arya National Shipping Lines (“ANSL”) for incorporation of a joint venture company by the name of Irano-
Hind Shipping Company Ltd. Private Joint Stock Company (“Irano-Hind”) with the following objectives:

(i) To develop and strengthen economic relations between India and Iran in the field of shipping;
(ii) To organize and operate efficient and commercially viable shipping services between and India and
Iran as well as to ports in the Far East and by prior agreement between our Company and ANSL;
(iii) To acquire in the first stage 500,000 dead weight tonnage suitable for the trades served;
(iv) To provide training in shipping to Iranian officers in shore and ships jobs.

In terms of the Irano-Hind MoA, the authorised share capital of Irano-Hind was stipulated to be one million
USDof which 49 per cent was to be contributed by our Company and 51 per cent was to be contributed by
ANSL. The shares held by each party to the Irano-Hind MoA shall not be transferred, hypothecated or disposed
of by either party or its nominees except to their directors or employees.

The board of Irano-Hind was to comprise of six directors including three directors appointed by each party to
the Irano-Hind MoA. Our Company is to provide to managerial and other staff as shall be necessary for the
shore based office for a period of three years as may be mutually agreed upon by Irano-Hind and our Company.

In the event that the shares of our Company or ANSL is held by any entity other than an Indian or Iranian entity
as the case maybe, the other party shall have the right to terminate the Irano-Hind MoA. The Irano-Hind MoA is
governed under the laws of Iran and the arbitration shall be under the provisions of the U.K. Arbitration Act.

6. Memorandum of Understanding between our Company and Cochin Shipyard Limited

Our Company has entered a memorandum of understanding (“MoU”) with Cochin Shipyard Limited (“CSL”)
on October 21, 2009 for setting up a joint venture company (“JVC”) for offshore marine services for acquiring,
maintaining and operating PSVs, AHTSVs and MSVs and other offshore floating vessels/units to cater to the
requirements of various E&P operators with regard to their offshore activities. As per the MoU, the Company
shall hold 51 per cent of the JVC and the balance shall be held by CSL. The JVC shall have three directors of
which two directors shall be appointed by the Company and one director shall be appointed by CSL. This
memorandum of understanding shall remain valid for a period of one year from the date of the MoU.

B. Memorandum of Understanding between our Company and the Ministry of Shipping, Government of
India

Our Company has entered into a memorandum of understanding (the “MoU”) with the Ministry of Shipping,
Government of India setting out the mission, vision and objectives of our Company for the year 2010-11.
Further, the MoU sets out various commitments and assistance that will be offered to our Company.
Additionally, the MoU also provides financial and operational targets for our Company for the year 2010-11 and
the comparison of the target with the performance of our Company in 2005-06, 2006-07, 2007-08, 2008-09 and
2009-10. Our Company enters into a memorandum of understanding with the Ministry of Shipping, Government
of India every year.

130
MANAGEMENT

Under the Articles of Association the Company is required to have at least three Directors and not more than 16
Directors. The Company currently has 14 Directors.

The following table sets forth details regarding the Board as of the date of filing of the Draft Red Herring
Prospectus:

Name, Father’s Name, Designation, Age Other Directorships/Partnerships/Trusts


Address, Occupation, Nationality, (in
Term and DIN years)
S. Hajara 57 Other directorships
(S/o Shibasanti Hajara)
1. Irano Hind Shipping Company Limited;
Chairman & Managing Director 2. Indian Register of Shipping;
Whole-time Director 3. Sethusamudram Corporation Limited;
4. SCI Forbes Limited;
Address: 5/A "Lands End", 29/D 5. India LNG Transport Company (No. 1) Limited;
Dongersi Road, Malabar Hill, Mumbai 6. India LNG Transport Company (No.2) Limited;
400 006 7. The Steamship Mutual Underwriting Association
(Bermuda) Limited; and
Occupation: Service 8. Baltic International Maritime Council.

Nationality: Indian

Term: December 31, 2012 or until further


orders, whichever is earlier

DIN: 00004485

Vijay Chhibber 54 Other directorships


(S/o Madhusudan Lal Chhibber)
1. Irano Hind Shipping Company Limited; and
(Official part-time) Director nominated 2. India LNG Transport Company (No.2) Limited.
by the Government

Address: D-1/174, Satya Marg, New


Delhi 110 021

Occupation: Additional Secretary &


Financial Advisor, Ministry of Shipping

Nationality: Indian

Term: Concurrent with the post of


Additional Secretary & Financial
Advisor, Ministry of Shipping

DIN: 00396838

Rajeev Gupta 52 Other directorships


(S/o Naresh Chandra Gupta)
1. Cochin Shipyard Limited;
(Official part-time) Director nominated 2. India LNG Transport Company (No. 1) Limited;
by the Government and
3. SCI Forbes Limited.
Address: 23, Dayanand Vihar,
Vikas Marg, New Delhi 110 092

131
Name, Father’s Name, Designation, Age Other Directorships/Partnerships/Trusts
Address, Occupation, Nationality, (in
Term and DIN years)
Occupation: Joint Secretary (Shipping),
JS(S), Ministry of Shipping.

Nationality: Indian

Term: Concurrent on the post of Joint


Secretary (Shipping), Ministry of
Shipping

DIN: 01980381

J. N. Das 56 Other directorships


(S/o Gajendra Nath Das)
Standard Steamship Owners’ & Indemnity Association
Director (Liner & Passenger Service) (Bermuda) Limited.
Whole-time Director

Address: Flat No. 13, 1st Floor,


Chitrakoot Cooperative Housing Society,
Altamount Road, Mumbai 400 026

Occupation: Service

Nationality: Indian

Term: December 23, 2012 (five years


from the date of assumption of charge of
the post or till the date of his
superannuation or until further orders
whichever is earlier.)

DIN: 00450563

Rear Admiral (Retd.) T. S. Ganeshan 61 Other directorships


(S/o T.R. Seshu)
Aayur Technology Solutions Private Limited.
Non-official part-time (Independent)
Director

Address: 526, Jalvayu Towers, NGEF


Layout, Sadananda Nagar, Bangalore,
560 038

Occupation: Service

Nationality: Indian

Term: August 10, 2013 (three years from


the date of assumption of charge i.e.
August 11, 2010 or until further orders
whichever is earlier)

DIN: 00409241

Kailash Gupta 57 Other directorships


(S/o Shiv Saran Lal)
Nil

132
Name, Father’s Name, Designation, Age Other Directorships/Partnerships/Trusts
Address, Occupation, Nationality, (in
Term and DIN years)
Director (Personnel & Administration)
Whole-time Director

Address: 156, 11B, Anita CHS, Mount


Pleasant Road, Malabar Hill, Mumbai
400 006

Occupation: Service

Nationality: Indian

Term: July 16, 2011 (five years from the


date of assumption of charge or till July
16, 2011 or until further orders,
whichever is earlier)

DIN: 00547007

Sushil Khanna 59 Other directorships


(S/o. Chand Karan Khanna)
1. OIL India Limited;
Non-official part-time (Independent) 2. Kerala Financial Corporation;
Director 3. Nicco Ventures Limited, and
4. The Information Company (Private) Limited.
Address: 218 B, Lake Terrace Extension,
Second floor, Kolkata 700 029

Occupation: Service

Nationality: Indian

Term: August 10, 2013 (three years from


the date of assumption of charge i.e.
August 11, 2010 or until further orders
whichever is earlier.)

DIN: 00115364

B. K. Mandal 56 Other directorships


(S/o Paresh Nath Mandal)
1. India LNG Transport Company (No. 3) Limited;
Director (Finance), Whole-time Director 2. SCI Forbes Limited; and
3. The Britannia Steam Ship Insurance Association
Address: 151, Jolly Makers Apartment Limited.
No. 3 Varuna Premises CHS Limited,
119, Cuffe Parade, Colaba, Mumbai 400
005

Occupation: Service

Nationality: Indian

Term: November 10, 2010 (five years


from the date of assumption of charge or
till the date of his superannuation or until
further orders, whichever is earlier)

133
Name, Father’s Name, Designation, Age Other Directorships/Partnerships/Trusts
Address, Occupation, Nationality, (in
Term and DIN years)
DIN: 00003904

Nasser Munjee 57 Other directorships


(S/o Mukhtar Cassamally)
1. ABB Limited;
Non-official part-time (Independent) 2. Housing and Urban Development Corporation
Director Limited;
3. Bharati AXA Life Insurance Company Limited;
Address: Benedict Villa, House No. 471 4. Cummins India Limited;
Saud Vaddo, Chorao Island, Tiswadi, 5. Tata Chemicals Limited;
Goa 403 102 6. Unichem Laboratories Limited;
7. Voltas Limited;
Occupation: Chairman, Development 8. Tata Motors Limited;
Credit Bank Limited 9. Neptune Developers Limited;
10. Development Credit Bank Limited;
Nationality: Indian 11. HDFC Limited;
12. Ambuja Cements Limited;
Term: August 10, 2013 (three years from 13. Bharati AXA General Insurance Company Limited;
the date of assumption of charge i.e. 14. Britannia Industries Limited;
August 11, 2010 or until further orders 15. Aga Khan Rural Support Programme India;
whichever is earlier) 16. Indian Institute for Human Settlements;
17. Himalayan Ski Village Private Limited;
DIN: 00010180 18. First American Securities Private Limited;
19. GIBA Holdings Private Limited; and
20. Emsaf, Mauritius.

Capt. K. S. Nair 59 Other directorships


(S/o Katoor Keshavan Nair)
1. India LNG Transport Company (No. 1) Limited;
Director (Bulk Carrier & Tanker) 2. India LNG Transport Company (No. 2) Limited;
Whole-time Director and
3. Irano Hind Shipping Company Limited
Address: A/21, Twin Towers, Off Veer
Savarkar Marg, Prabhadevi, Mumbai –
400 025

Occupation: Service

Nationality: Indian

Term: December 31, 2010 (upto a period


of 5 years from the date of assumption of
charge of the post i.e. November 3, 2008
or the date of his superannuation or until
further orders, whichever is earliest.)

DIN: 02437184

Arun Ramanathan 61 Other directorships


(S/o R.V. Ramanathan)
1. United Stock Exchange of India Limited;
Non-official part-time (Independent) 2. Jenson & Nicholson Limited;
Director 3. JCT Electronics Limited;
4. Indian Clearing Corporation Limited;
Address: 6A, 6 West Cross Street, 5. National Textiles Corporation Limited; and
Shenoy Nagar, Chennai-600 030 6. Cetex Energy Generation Company Limited.

134
Name, Father’s Name, Designation, Age Other Directorships/Partnerships/Trusts
Address, Occupation, Nationality, (in
Term and DIN years)
Occupation: Service

Nationality: Indian

Term: August 10, 2013 (three years from


the date of assumption of charge i.e.
August 11, 2010 or until further orders
whichever is earlier)

DIN: 00308848

U. Sundararajan 68 Other directorships


(S/o Uppiliappan Sundararajan)
1. Bharat Oman Refineries Limited;
Non-official part-time (Independent) 2. IDFC Trustee Co. Limited; and
Director 3. IDFC AMC Trustee Company Limited.

Address:1302, 13th floor, Whispering


Palms Building No.3, Lokhandwala
Township, Akurli Road, Kandivli (E),
Mumbai 400 101

Occupation: Service

Nationality: Indian

Term: August 10, 2013 (three years from


the date of assumption of charge i.e.
August 11, 2010 or until further orders
whichever is earlier)

DIN: 00001533

S. C. Tripathi 64 Other directorships


(S/o Harish Chandrapati Tripathi)
1. Reliance Capital Asset - Management Company
Non-official part-time (Independent) Limited;
Director 2. Indusind Bank Limited;
3. IL&FS Energy Development Corporation Limited;
Address: No. 27, Sector 15A, Noida, 4. IL&FS Infrastructure Development Corporation
Uttar Pradesh 201 301 Limited;
5. Gammon Infrastructure Projects Limited;
Occupation: Service 6. Power Grid Corporation Limited; and
7. Kailash Hospital & Research Centre Limited,
Nationality: Indian Delhi.

Term: August 10, 2013 (three years from


the date of assumption of charge i.e.
August 11, 2010 or until further orders
whichever is earlier)

DIN: 00941922

Arun Kumar Verma 59 Other directorships


(S/o. Darbarilal Verma)
Nil
Non-official part-time (Independent)

135
Name, Father’s Name, Designation, Age Other Directorships/Partnerships/Trusts
Address, Occupation, Nationality, (in
Term and DIN years)
Director

Address: A-14, Shahid Nagar,


Bhubaneshwar 751 007

Occupation: Chartered Accountant

Nationality: Indian

Term: August 10, 2013 (three years from


the date of assumption of charge i.e.
August 11, 2010 or until further orders
whichever is earlier)

DIN: 03220124

Brief Biographies of the Directors

S. Hajara

S. Hajara, Chairman & Managing Director, Whole-time Director has been associated with the Company since
May 2, 1973 and became the Chairman & Managing Director of the Company with effect from September 1,
2005. He holds a bachelors degree in Science (Chemistry) and has completed his post graduate diploma in
Management from Indian Institute of Management, Kolkata. He also holds a degree in Law from Kolkata
University and post graduate diplomas in Professional Ship Management and in International Maritime Law &
Marine Insurance from Norwegian Shipping Academy, Oslo. He has experience in marketing, chartering, import
operations, liner conference/bilateral matters, LNG Projects and commercial operations in liner, dry bulk and
tanker sectors.

Vijay Chhibber

Vijay Chhibber is the Additional Secretary and Financial Advisor, Ministry of Shipping, an ex-officio and has
been nominated on the Board of Directors by the Government as (Official part-time) Director of the Company.
He was appointed on the Board of Directors in December 2008. He is an I.A.S. officer of the 1978 batch
Manipur Tripura cadre and holds a bachelors and masters degree in History from St. Stephen’s College,
University of Delhi. He held several posts in both the State and Central Government and was the under
Secretary and Deputy Secretary in the Department of Commerce, Deputy Director in AIIMS, Director in
Cabinet Secretariat and Joint Secretary in Department of Fertilizers. He has also worked as Deputy and Joint
Secretary in the Departments of Energy, Public Works, as Director in Department of Industries and Secretary to
the Chief Minister Manipur. He was also a District Magistrate of Ukhrul District in Manipur. He has held the
post of Principal Secretary/Commissioner, Government of Manipur with responsibilities relating to finance,
health, education, public health & engineering, social welfare, tribal welfare, elections and others. He has also
been the Chief Election Officer of the State of Manipur. He is also an alumni of the National Defence College.

Rajeev Gupta

Rajeev Gupta is the Joint Secretary (Shipping), Ministry of Shipping, an ex-officio and has been nominated on
the Board of Directors by the Government as (Official part-time) Director. He was appointed on the Board of
Directors in June 2007. He is an Indian Railways Service of Mechanical Engineers Officer and holds a
bachelors degree in both Mechanical and Electrical Engineering from the Institute of India. He has had
experience in shipping, inland waterways, chartering, enterprise planning, vigilance, human resource
management among other subjects. He has held several posts in Central Government and was in the Railway
Board and was involved in formulating the Tenth Five Year Plan for Railways.

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J.N. Das

J. N. Das is the Director (Liner & Passenger Service) Whole-time Director since December 2007. He holds a
bachelors degree in Marine Engineering from Marine Engineering Training College, Kolkata and possesses First
Class Engineer (MOTOR) Certificate of Competency from Ministry of Transport. He is a member of the
Institute of Engineers and a fellow of Institute of Marine Engineers. He is also on the Board of the Standard
Steamship Owners' Protection and Indemnity Association (Bermuda) Limited. He has vast experience in
shipping management, bulk carriers, tankers, chemicals, LPG and LNG operations, break bulk and container
services, new building and offshore services.

Rear Admiral (Retd.) T.S. Ganeshan

Rear Admiral (Retd.) T.S. Ganeshan, is Non Official Part-time (Independent) Director inducted on the Board of
Directors in August 2010. He is also the Chairman of the Remuneration Committee of the Company. He holds a
bachelors degree in Electrical Engineering from the College of Engineering, Guindy, Chennai. He has served in
the Indian Navy for over three decades. He has held various posts including that of Director (Ship Production),
Director (Naval Design) at Naval Headquarters and Project Director (Electronics, Weapons & IT) for the ATV
project. He has vast experience in Naval shipbuilding and management of public sector undertaking. He is the
recipient of Nao Sena and Vishisht Seva medals and is an alumni of National Defence College. He has held the
position of Chairman & Managing Director of Garden Reach Shipbuilders and Engineers Limited (PSU under
Ministry of Defence), Kolkata from May 2005 to April 2008.

Kailash Gupta

Kailash Gupta is Director (Personnel & Administration) Whole-time Director in the Company since July 2006.
He holds a bachelors degree with honours in economics from University of Rajasthan and masters degree in
Personnel Management from XLRI, Jamshedpur. He also holds a degree in Law from the University of Delhi.
He has managerial experience in both private sector and public sector for over 37 years.

Sushil Khanna

Sushil Khanna is Non Official Part-time (Independent) Director inducted on the Board of Directors in August
2010. He is also a member of the Remuneration Committee of the Company. He holds a bachelors degree in
Science (Physics) and is a fellow of Indian Institute of Management, Kolkata. He also holds a post graduate
diploma in Management from Indian Institute of Management, Kolkata. He is a professor of Strategic
Management and Economics at the Indian Institute of Management, Kolkata. He has three decades of
experience as an investment banker, as an academician in the areas of Corporate Strategy, Organisational
Restructuring, Finance and General Management. He has also served as a consultant and advisor for large
number of public sector and private sector companies in India and Bangladesh.

B.K. Mandal

B. K. Mandal is Director (Finance) Whole-time Director in the Company since November 2005. He is also a
member of the Shareholders’ Investor Grievance Committee of the Company. He holds a bachelors degree in
Commerce (Hons.) from Calcutta University. He holds a masters degree in management from the Indian
Institute of Management, Ahmedabad, and is also a fellow member of the Institute of Cost & Works
Accountants of India. He was earlier working with National Thermal Power Corporation Limited, Delhi, as
General Manager, Finance and has also worked with Bharat Heavy Electricals Limited in the initial years of his
career.

Nasser Munjee

Nasser Munjee is Non Official Part-time (Independent) Director inducted on the Board of Directors in August
2007 and was reappointed in August 2010 based on the fresh nomination received from the Ministry of
Shipping. He is the Chairman of the sub-committee of the board of the Company for raising finance and is also a
member of the Remuneration Committee of the Company. Nasser Munjee holds a masters degree in Economics
from London School of Economics, UK. He held the position of (i) an executive director in HDFC Bank for a
period of 20 years and (ii) the managing director and chief executive officer in IDFC for a period of 7 years. He
is on the board of directors of 15 companies in India including Tata Motors, Tata Chem, Britannia Industries,
Cummins India, ABB India, Ambuja Cements (now part of the HOLCIM group). He is also Chairman of

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Development Credit Bank and of two other Aga Khan institutions in India. He was the President of the Bombay
Chamber of Commerce and Industry and has served on numerous Government Task Forces on Housing and
Urban Development.

K. S. Nair

K. S. Nair is Director (Bulk Carrier & Tanker) Whole-time Director in the Company since November 2008. He
holds a bachelors degree in Commerce with specialization in Banking from the Pune University and has
obtained a Certificate of Competency for Master (Foreign going) from the Directorate General of Shipping,
Government of India. He has been the Dean of Nautical Studies in the Company’s Maritime Training Institute,
Powai. He has been instrumental in expanding full fledged operations of the Company’s office at Chennai in
1987 and had also set up the Company representative office at Shanghai.

Arun Ramanathan

Arun Ramanathan is Non Official Part-time (Independent) Director inducted on the Board in August 2010. He is
a member of the Audit Committee and Shareholders’/Investors’ Grievance Committee of the Company. He
holds a bachelors degree in Physics from Madras University and masters degree in (i) Nuclear Physics from
Andhra University; (ii) Business Administration from Madras University, and (iii) Development Economics
from Cambridge University, UK. He is also an Associate Member of the Institute of Cost and Works
Accountants of India. As an I.A.S officer, he has held several assignments in Industry, Finance, Food, Consumer
Protection, Transport and General Administration. In the Government of India, he was Secretary (Chemicals &
Petrochemicals), Secretary (Financial Services) and the Union Finance Secretary. He was the Finance Secretary
at the time of the global financial crisis and was nominated by the Prime Minister to chair the Group of
Secretaries to recommend measures needed to counter the meltdown in the financial and industrial sectors.

U. Sundararajan

U. Sundararajan is Non Official Part-time (Independent) Director inducted on the Board in July 2007 and
reappointed in August 2010 based on the fresh nomination received from the Ministry of Shipping. He is also
the Chairman of the Audit Committee of the Company and a member of the Strategic Committee of the
Company. He is also an associate member of the Institute of Cost and Works Accountants of India and has vast
experience and knowledge in financial management and general management. He was the former Chairman and
Managing Director of BPCL. He has also served as part time external director on the board of several companies
including Gujarat State Petronet Limited and Larsen & Toubro Limited.

S.C. Tripathi

S. C. Tripathi is Non Official Part-time (Independent) Director inducted on the Board in December 2007 and
reappointed in August 2010 based on the fresh nomination received from the Ministry of Shipping. He is also a
member of the Audit Committee and the chairman of Strategy Committee of the Company. He is an I.A.S
officer and was the former Secretary to Government of India. He has experience in Finance, Economics and in
petroleum sector. He holds a bachelors degree in Law from Lucknow University and holds a masters degree in
Science (Physics- Specialisation in Electronics). He also holds a post graduate diploma in Development Studies
(Cantab.) (Cambridge University), AIMA Diploma in management. He started his career as a Lecturer in
Physics in 1964 and joined the I.A.S. in 1968 (Second Rank). He spent nearly 20 years in Finance and Industry
sectors at Chief Executive/Secretary level at the State and Central Government and in representative capacity at
international levels. He retired as Secretary, Ministry of Petroleum and Natural Gas in the Government of India
in December 2005.

Arun Kumar Verma

Arun Kumar Verma Non Official Part-time (Independent) Director inducted on the Board in August 2010 and
he is a member of the Audit Committee and the Shareholders’/Investors’ Grievance Committee of the Company.
He holds a bachelors degree in Law from Utkal University. He is a practicing Chartered Account and also holds
Diploma in Information Systems Audit from the Institute of chartered Accountants of India. He has vast
experience in areas concerning Accounts, Audit, Finance and Law.

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Terms of Appointment of the Chairman & Managing Director and the Executive Directors

S. Hajara

S. Hajara has been appointed as the Chairman & Managing Director (Whole-time Director) of the Company and
shall hold the office for a period of five years from September 1, 2005 in the first instance or till the date of his
superannuation or until further orders whichever event occurs earlier. Pursuant to the letter dated September 1,
2010, the term of S. Hajara was extended till December 31, 2012. The agreement may be terminated by either
party by giving three months notice. S. Hajara, after retirement/resignation from the service of the Company,
shall not accept any appointment or post in any firm or company with which the Company has had business
relations within one year from the date of his retirement/resignation. Other terms of his appointment are
summarized as follows:

Particulars Remuneration
Salary Rs. 80,000 per month in the scale of Rs. 80,000 – Rs. 125,000 with effect from January 1,
2007 with an annual increment @ 3% of basic pay on the anniversary date of his
appointment until the maximum of pay scale is reached.
Perquisites Allowances shall not exceed 50 per cent of the basic pay as indicated in Department of
Public Enterprises’ Office Memorandum (“DPE’s OM”) dated November 26, 2008 and
April 2, 2009. In addition, he is also entitled to:-
• Dearness Allowance: as per the New Industrial Dearness Allowance Scheme
(“NIDAS”) as provided in the DPE’s OM dated November 26, 2008 and April 2, 2009
• House Rent Allowance: as per DPE’s OM dated November 26, 2008
• Accomodation: wherever our Company has built residential flats in the industrial
township or purchased residential flat in the cities, arrangements would be made by
our Company to provide a suitable residential accommodation to him. In the absence
of the same, suitable accommodation could be arranged by our Company by taking
premises on lease basis at headquarters of our Company
• Conveyance: entitlement to the facility of staff car for private use
• Performance related payments and superannuation benefits: performance related
payments and superannuation benefits shall be as per DPE’s OM dated November 26,
2008 and April 2, 2009

B.K. Mandal

B.K. Mandal was appointed as Director (Finance) (Whole-time Director) of the Company and shall hold the
office for a period of five years from November 11, 2005 in the first instance till the date of his superannuation
or until further orders whichever event occurs earlier. The agreement may be terminated by either party by
giving three months notice. The following are the terms of appointment:

Particulars Remuneration
Salary Rs. 75,000 per month in the scale of Rs. 75,000 – Rs. 100,000 with effect from January 1,
2007 with an annual increment @ 3% of basic pay on the anniversary date of his
appointment until the maximum of pay scale is reached.
Perquisites Allowances shall not exceed 50 per cent of the basic pay as indicated in DPE’s OM dated
November 26, 2008 and April 2, 2009. In addition, he is also entitled to:-
• Dearness Allowance: as per the NIDAS as provided in the DPE’s OM dated
November 26, 2008 and April 2, 2009
• House Rent Allowance: as per DPE’s OM dated November 26, 2008
• Accomodation: wherever our Company has built residential flats in the industrial
township or purchased residential flat in the cities, arrangements would be made by
our Company to provide a suitable residential accommodation to him. In the absence
of the same, suitable accommodation could be arranged by our Company by taking
premises on lease basis at headquarters of our Company
• Conveyance: entitlement to the facility of staff car for private use
• Performance related payments and superannuation benefits: Performance related
payments and superannuation benefits shall be as per DPE’s OM dated November 26,

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Particulars Remuneration
2008 and April 2, 2009

Kailash Gupta

Kailash Gupta was appointed as Director (Personnel & Administration) (Whole-time Director) of the Company
and shall hold the office for a period of five years from July 20, 2006 in the first instance till the date of his
superannuation or until further orders whichever event occurs earlier. The agreement may be terminated by
either party by giving three months notice. The following are the terms of appointment:

Particulars Remuneration
Salary Rs. 75,000 per month in the scale of Rs. 75,000 – Rs. 100,000 with effect from January 1,
2007 with an annual increment @ 3% of basic pay on the anniversary date of his
appointment until the maximum of pay scale is reached.
Perquisites Allowances shall not exceed 50 per cent of the basic pay as indicated in DPE’s OM dated
November 26, 2008 and April 2, 2009. In addition, he is also entitled to:-
• Dearness Allowance: as per the NIDAS as provided in the DPE’s OM dated
November 26, 2008 and April 2, 2009
• House Rent Allowance: as per DPE’s OM dated November 26, 2008
• Accomodation: wherever our Company has built residential flats in the industrial
township or purchased residential flat in the cities, arrangements would be made by
our Company to provide a suitable residential accommodation to him. In the absence
of the same, suitable accommodation could be arranged by our Company by taking
premises on lease basis at headquarters of our Company
• Conveyance: entitlement to the facility of staff car for private use
• Performance related payments and superannuation benefits: Performance related
payments and superannuation benefits shall be as per DPE’s OM dated November 26,
2008 and April 2, 2009

K.S. Nair

K.S. Nair was appointed as Director (Bulk Carrier & Tanker) (Whole-time Director) of the Company and shall
hold the office for a period of five years from November 3, 2008 in the first instance till the date of his
superannuation or until further orders whichever event occurs earlier. The agreement may be terminated by
either party by giving three months notice. The following are the terms of appointment:

Particulars Remuneration
Salary Rs. 75,000 per month in the scale of Rs. 75,000 – Rs. 100,000 with effect from January 1,
2007 with an annual increment @ 3% of basic pay on the anniversary date of his
appointment until the maximum of pay scale is reached.
Perquisites Allowances shall not exceed 50 per cent of the basic pay as indicated in DPE’s OM dated
November 26, 2008 and April 2, 2009. In addition, he is also entitled to:-
• Dearness Allowance: as per the NIDAS as provided in the DPE’s OM dated
November 26, 2008 and April 2, 2009
• House Rent Allowance: as per DPE’s OM dated November 26, 2008
• Accomodation: wherever our Company has built residential flats in the industrial
township or purchased residential flat in the cities, arrangements would be made by
our Company to provide a suitable residential accommodation to him. In the absence
of the same, suitable accommodation could be arranged by our Company by taking
premises on lease basis at headquarters of our Company
• Conveyance: entitlement to the facility of staff car for private use
• Performance related payments and superannuation benefits: Performance related
payments and superannuation benefits shall be as per DPE’s OM dated November 26,
2008 and April 2, 2009

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J.N. Das

J.N. Das was appointed as Director (Liner & Passenger Service) (Whole-time Director) of the Company and
shall hold the office for a period of five years from December 24, 2007 in the first instance till the date of his
superannuation or until further orders whichever event occurs earlier. The agreement may be terminated by
either party by giving three months notice or on payment of three months’ salary in lieu thereof. The following
are the terms of appointment:

Particulars Remuneration
Salary Rs. 75,000 per month in the scale of Rs. 75,000 – Rs. 100,000 with effect from December
24, 2007 with an annual increment @ 3% of basic pay on the anniversary date of his
appointment until the maximum of pay scale is reached.
Perquisites Allowances shall not exceed 50 per cent of the basic pay as indicated in DPE’s OM dated
November 26, 2008 and April 2, 2009. In addition, he is also entitled to:-
• Dearness Allowance: as per the NIDAS as provided in the DPE’s OM dated
November 26, 2008 and April 2, 2009
• House Rent Allowance: as per DPE’s OM dated November 26, 2008
• Accomodation: wherever our Company has built residential flats in the industrial
township or purchased residential flat in the cities, arrangements would be made by
our Company to provide a suitable residential accommodation to him. In the absence
of the same, suitable accommodation could be arranged by our Company by taking
premises on lease basis at headquarters of our Company.
• Conveyance: entitlement to the facility of staff car for private use
• Performance related payments and superannuation benefits: Performance related
payments and superannuation benefits shall be as per DPE’s OM dated November 26,
2008 and April 2, 2009

Payment or benefit to Directors of the Company

The sitting fees/other remuneration paid to the Directors in Fiscal 2010 are as follows:

1. Remuneration to Executive Directors:

Name of the Director Consolidated Salary Perquisites, Allowances Total


& Other Benefits
S. Hajara 1,076,386 772,056 1,848,442
B.K. Mandal 1,003,202 555,156 1,558,358
Kailash Gupta 1,045,092 408,127 1,453,219
J.N. Das 844,178 567,981 1,412,159
Capt. K.S. Nair 934,918 570,093 1,505,011

Note No. 1:- Consolidated salary includes basic salary, dearness allowance, contribution to provident fund,
leave encashment and leave salary on superannuation.

2. Remuneration to Non- Executive Directors:

Name of the Director Sitting Fees

Vijay Chibber -
Rajeev Gupta -
U Sundararajan 580,000
Nasser Munjee 180,000
S C Tripathi 240,000

The part-time official Government Directors do not receive any remuneration from the Company. Apart from
the sitting fees, the non-executive Directors do not receive any other remuneration. In addition to the above,
wherever necessary, the Directors are reimbursed the travelling and other related expenses for attending Board
and other Meetings.

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No amount or benefit (non salary related) has been paid within the two preceding years or is intended to be paid
or given to any of the Company’s officers including the Directors and key management personnel, including
benefits in kind for all capacities and contingent or deferred compensation. None of the beneficiaries of loans,
and advances and sundry debtors are related to the Directors of the Company. Further, except statutory benefits
upon termination of their employment in the Company or retirement, no officer of the Company, including the
Directors and the key management personnel, are entitled to any benefits upon termination of employment.

As of June 30, 2010, except B.K. Mandal, J.N. Das, D.S. Kanvinde, J.V.S. Rao, Arun Kumar Gupta, P.D.
Anand, Dipankar Haldar, U.D. Jejurikar, Prashanta Deb, N. Bandopadhyay, N. R. Saraiya, S.G. Sadawarti, S.K.
Maji and G. Kaushalendra, no loans have been availed by the Directors or the key management personnel from
the Company.

Shareholding of Directors

The shareholding of the Directors as of the date of filing this Draft Red Herring Prospectus is set forth below:

Name of Director Number of Equity Shares held


S. Hajara 1,507
Vijay Chhibber 1,515
Rajeev Gupta 30
J. N. Das* 1
Rear Admiral (Retd.) T. S. Ganeshan Nil
Kailash Gupta* 1
Sushil Khanna Nil
B. K. Mandal 60
B. K. Mandal* 1
Nasser Munjee Nil
Capt. K. S. Nair* 1
Arun Ramanathan Nil
U. Sundararajan Nil
S. C. Tripathi Nil
Arun Kumar Verma Nil
*
Held as nominees of our Company

The Articles of Association do not require the Directors to hold any qualification shares.

Relationships between Directors

None of the Directors are related to each other.

Borrowing Powers of Board

Pursuant to Section 192A of the Companies Act, 1956 read with the Companies (Passing of Resolutions by
Postal Ballots) Rules, 2001, consent of the shareholders was accorded to increase in the borrowing limits from
existing Rs. 50,000 million to Rs. 120,000 million through postal ballot on March 22, 2010. The Board is
authorised to borrow from time to time, all such sum(s) of money (including by way of external commercial
borrowings in foreign denominated currencies from any foreign sources/foreign countries as prescribed by the
guidelines in this regard), as the Board may deem requisite for the purpose of the Company, not withstanding
that the money(s) to be borrowed together with the money(s) already borrowed by the Company and outstanding
(apart from the temporary loans obtained or to be obtained from the Company's bankers in the ordinary course
of business) may exceed the aggregate of the paid-up capital and free reserves of the Company i.e. reserves not
set apart for any specific purpose, provided that the total amount borrowed / to be borrowed by the Board shall
not, at any time, exceed the limit of Rs. 120,000 million.

Corporate Governance

The provisions of the Listing Agreement to be entered into with BSE and the NSE with respect to corporate
governance will be applicable to us immediately upon the listing of the Equity Shares with BSE and the NSE.
We believe we are in compliance with the requirements of the applicable regulations, including the Listing

142
Agreement with BSE and the NSE and the SEBI Regulations, in respect of corporate governance including
constitution of the Board and committees thereof. The corporate governance framework is based on an effective
independent Board, separation of the Board’s supervisory role from the executive management team and
constitution of the Board Committees, as required under law.

The Company’s Board is constituted in compliance with the Companies Act and the Listing Agreement with
BSE and the NSE. The Board functions either as a full board or through various committees constituted to
oversee specific functions. The executive management provides the Board detailed reports on its performance
periodically.

Currently the Board has 14 Directors and the Chairman is an Executive Director. In compliance with the
requirements of Clause 49 of the Listing Agreement, we have 5 Executive Directors, 2 official part-time
(Government) Directors and 7 non-official part-time (independent) Directors, on the Board.

Committees of the Board

Audit Committee

The members of the Audit Committee are:

1. U. Sundararajan, Chairman;
2. Arun Ramanathan;
3. Arun K. Verma; and
4. S.C. Tripathi.

The Audit Committee was constituted by a meeting of the Board held on May 26, 2000. The scope and function
of the Audit Committee is in accordance with Section 292A of the Companies Act, Clause 49 of the Listing
Agreement and the DPE guidelines 2010 which have been mandatory from the year 2010-11 and its terms of
reference include the following:

Role of the Audit Committee

I. General role of the Audit Committee

The role of the audit committee shall include the following:

1. Oversight of company's financial reporting process and the disclosure of its financial information to
ensure that the financial statement is correct, sufficient and credible;
2. Recommending to the Board, the appointment, re-appointment and, if required, the replacement or
removal of the statutory auditors and the fixation of audit fees;
3. Approval of payment to statutory auditors for any other services rendered by the statutory auditors;
4. Reviewing, with the Management, the annual financial statements before submission to the board for
approval, with particular reference to:
(a) Matter required to be included in the Directors’ Responsibility Statement to be included in the Board's
report in terms of clause (2AA) of Section 217 of the Companies Act 1956;
(b) Changes, if any, in accounting policies and practices and reasons for the same;
(c) Major accounting entries involving estimates based on the exercise of judgement by management;
(d) Significant adjustments made in the financial statements arising out of audit findings;
(e) Compliance with listing and other legal requirements relating to financial statements;
(f) Disclosure of any related party transactions; and
(g) Qualifications in draft audit report.
5. Review with the management, the quarterly financial statements before submission to Board for approval;
6. Reviewing with the management, performance of internal auditors and adequacy of the internal control
systems;
7. Reviewing the adequacy of internal audit function, if any, including the structure of the internal audit
department, staffing and seniority of the official heading the department, reporting structure, coverage
and frequency of internal audit;
8. Discussion with internal auditors and/or auditors any significant findings and follow up thereon;

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9. Reviewing the findings of any internal investigations by the internal auditors/auditors/agencies into
matters where there is suspected fraud or irregularity or a failure of internal control systems of a material
nature and reporting the matter to the Board;
10. Discussion with statutory auditors before the audit commences, about the nature and scope of audit as
well as post-audit discussion to ascertain any area of concern;
11. To look into reasons for substantial defaults in the payment to the depositors, debenture holders,
shareholders (in case of non-payment of declared dividends) and creditors;
12. To review functioning of the Whistle Blower mechanism;
13. Review and follow up action on audit observations of C&AG audit;
14. Approval of appointment of CFO (i.e. the whole-time Finance Director or any other person heading the
finance function or discharging that function) after assessing the qualifications, experience and
background, etc. of the candidate;
15. Review follow up action on the recommendations of Committee of Public Undertakings (COPU) of the
Parliament;
16. Provide an open avenue of communication between the independent auditor, internal auditor and the
Board of Directors;
17. Review all related party transactions in the company. For this purpose, Audit Committee may designate a
member who shall be responsible for reviewing related party transactions;
18. Review with independent auditor the coordination of audit efforts to assure completeness of coverage,
reduction of redundant efforts and effective use of all audit resources;
19. Consider and review with the independent auditor and management:
a. adequacy of internal controls including computerised information system controls and security; and
b. related findings and recommendations of the independent auditor and internal auditor, together with
management responses.
20. Consider and review with the management, internal auditor and independent auditor:
(a) significant findings during the year, including status of previous audit recommendations; and
(b) any difficulties encountered during audit work including any restrictions on the scope of activities or
access to required information.

(II) Review of information by the Audit Committee

The Audit Committee shall mandatorily review the following information:

1. Management discussion and analysis of financial condition and results of operations;


2. Statement of significant related party transactions in the ordinary course of business (as defined by Audit
Committee) to be submitted by Management periodically. In addition, the Management shall provide for
review by the Audit Committee:
(a) details of material individual transactions with related parties which are not in normal course of
business; and
(b) details of material individual transactions with related parties or others which are not on an arm’s
length basis together with management’s justification for the same.
3. Management letter/letters of internal control weaknesses issued by statutory auditors;
4. Internal audit reports relating to internal control weaknesses;
5. Appointment, removal and terms of remuneration of Internal auditor shall be subject to review by the
Audit Committee; and
6. Certification/declaration of financial statements by the Chief Executive/Chief Finance Officer.

(III) Role in relation to the public issues, rights issues, preferential issues etc.

The Audit Committee shall review the uses/applications of the funds raised through public issues, rights
issues etc. so as to see that the funds have been utilized for the purposes stated in the offer document.

(IV) Powers of Audit Committee

The Audit Committee shall have powers, which shall include the following:

1. To investigate any activity within its terms of reference;

144
2. To seek information from any employee;
3. To obtain outside legal or other professional advice;
4. To secure attendance of outsiders with relevant expertise, if it considers necessary; and
5. To protect whistle blowers.

The Audit Committee is required to meet at least four times in a year under Clause 49 of the Listing Agreement.
The last meeting of the Audit Committee was held on September 29, 2010.

Share Transfer Committee

The members of the Share Transfer Committee are:

1. S. Hajara, Chairman;
2. B.K. Mandal;
3. Kailash Gupta;
4. Capt. K.S. Nair; and
5. J.N. Das.

The Share Transfer Committee was constituted by the Board in the meeting held on September 29, 1992. The
terms of reference of the Share Transfer Committee of the Company include approval of the transfer and
transmission of shares and other related matters.

Shareholders/ Investors’ Grievance Committee

The members of the Shareholders/Investors’ Grievance Committee are:

1. Arun Ramanathan, Chairman;


2. Arun K. Verma; and
3. B.K. Mandal.

The Shareholders/ Investors’ Grievance Committee was constituted by the Board at the meeting held on
December 26, 2001. The Shareholders/ Investors’ Grievance Committee is responsible for the redressal of
shareholder grievances. The terms of reference of the Shareholders/ Investors’ Grievance Committee of the
Company include the following:

1. Redressal of shareholders’ and investors’ complaints, including but not limited to, transfer of shares, non-
receipt of balance sheet and non-receipt of dividends;
2. Allotment and listing of shares; and
3. Reference to statutory and regulatory authorities for investors grievances.

Contracts Committee

The members of the Contracts Committee are:

1. S. Hajara, Chairman;
2. B.K. Mandal;
3. Kailash Gupta;
4. J.N. Das; and
5. Capt. K.S. Nair.

The terms of reference of the Contracts Committee include the matters pertaining to contracts having financial
implication of high value nature or any other matter.

Sub-Committee for Raising Finances

The members of the Sub-Committee for raising finances are:

1. Nasser Munjee, Chairman;


2. U. Sundararajan; and
3. B.K. Mandal.

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The terms of reference of the Sub-Committee include raising finances from the banks/other financial
institutions.

Strategy Committee

The members of the Strategy Committee are:

1. S.C. Tripathi, Chairman;


2. Nasser Munjee;
3. U. Sundararajan;
4. Sushil Khanna;
5. Vijay Chhibber; and
6. Rajeev Gupta.

The terms of reference of the Strategy Committee of the Company include looking into the strategic decisions of
the Company.

Remuneration Committee

The members of the Remuneration Committee are:

1. Rear Admiral (Retd.) T.S. Ganeshan, Chairman;


2. Nasser Munjee; and
3. Prof. Sushil Khanna.

The terms of reference of the Remuneration Committee of the Company include deciding the annual bonus,
variable pay pool and policy for its distribution across the executives and non-unionised supervisors within the
prescribed limits.

FPO Committee

The members of the FPO Committee are:

1. S. Hajara, Chairman;
2. B.K. Mandal;
3. Kailash Gupta;
4. U. Sundararajan;
5. Nasser Munjee; and
6. Rajeev Gupta.

The FPO Committee was constituted by the Board at the meeting held on September 29, 2010. The terms of
reference of the FPO Committee of the Company include the following:

1. To approve the restated/audited financial statements for inclusion in the Draft Red Herring Prospectus
and/or the Red Herring prospectus and/or the Prospectus as the case may be in connection with the
issue.

2. To approve, adopt and file the Draft Red Herring Prospectus, the Red Herring Prospectus, the final
Prospectus for the Issue, with SEBI, the Registrar of Companies, Maharashtra and/or the stock
exchange(s), as the case may be, and to make any corrections or alterations therein;

3. To decide on the timing, pricing and all the terms and conditions of the Issue of the equity shares,
including the price band, and to accept any amendments, modifications, variations or alterations
thereto, approve the basis for allocation and confirm allocation of the equity shares to various
categories of persons as disclosed in the Draft Red Herring Prospectus, the Red Herring Prospectus and
the Prospectus, in consultation with the BRLMs and do all such acts and things as may be necessary
and expedient for, and incidental and ancillary to, the Issue;

146
4. To appoint and enter into arrangements with the book running lead managers, underwriters to the Issue,
syndicate members to the Issue, brokers to the Issue, escrow/collection/refund bankers to the Issue,
registrars, legal advisors and all other agencies or persons or intermediaries to the Issue and to
negotiate and finalise the terms of their appointment, including but not limited to execution of the book
running lead managers mandate letter, negotiation, finalisation and execution of the agreement with the
book running lead managers etc.;

5. To finalise, settle, execute and deliver or arrange the delivery of the syndicate agreement, underwriting
agreement, escrow agreement, certificates and all other documents, deeds, agreements and instruments
as may be required or desirable in relation to the Issue;

6. To open with the bankers to the Issue such accounts as are required by the regulations issued by SEBI;

7. To open and operate bank account(s) of the Company in terms of the escrow/collection/refund
agreement for handling/collecting/refund for the Issue and to authorise one or more officers of the
company to execute all documents/deeds as may be necessary in this regard;

8. To authorise and approve the expenditure and payment of fees in connection thereto;

9. To issue receipts/ allotment letters/ confirmations of allotment note/anchor investor allocation notice
notes representing the underlying equity shares in the capital of the Company;

10. To make applications to the Reserve Bank of India and such other authorities as may be required for
the purpose of allotment of equity shares to non-resident investors;

11. To do all such acts, deeds, matters and things and execute all such other documents, etc. as it may, in
its absolute discretion, deem necessary or desirable for such purpose, including without limitation, to
allot the equity shares to the successful allottees as permissible in law, issue of share certificates in
accordance with the relevant rules;

12. To make applications for listing of the equity shares in one or more stock exchange(s) for listing of the
equity shares of the Company and to execute and to deliver or arrange the delivery of necessary
documentation to the concerned stock exchange(s); and

13. To settle all questions, difficulties or doubts that may arise in regard to such issues or allotment as it
may, in its absolute discretion deem fit.

Interest of Directors

The Directors may be deemed to be interested to the extent of any fees and remuneration payable to them by the
Company and/or the Promoters as well as to the extent of any reimbursement of expenses payable to them, and
to the extent of remuneration paid to them for services rendered as an officer or employee of the Company or
the Promoters

Except J. N. Das, Kailash Gupta, Capt. K. S. Nair, B. K. Mandal and U.C. Grover who hold 1 equity share each
as a nominee of the Government of India, the Directors may also be regarded as interested in the Equity Shares
held by them or by the companies, firms and trusts, in which they are interested as directors, members, partners,
trustees and promoters, pursuant to this Issue. Except as aforesaid, the Directors may also be deemed to be
interested to the extent of any dividend payable to them and other distributions in respect of the Equity Shares.

None of the Directors have interest in any property acquired by the Company within the preceding two years
from the date of this Draft Red Herring Prospectus.

Except as stated in “Related Party Transactions” in section “Financial Statements” beginning on page 156 and
described herein to the extent of shareholding in the Company, if any, the Directors do not have any other
interest in the business of the Company.

Except Vijay Chhibber and Rajeev Gupta who have been appointed by the Government of India, there is no
arrangement or understanding with the major shareholders, customers, suppliers or others, pursuant to which the

147
Directors or the key management personnel were selected as director or member of senior management. For
details, see “History and Certain Corporate Matters” beginning on page 117.

Changes in the Board in the last three years

Name Date of Appointment/ Change/ Reason


Cessation
A.K. Mago July 28, 2007 – Appointed Expiry of the tenure
July 27, 2010 – Ceased
Dr. Bakul H. Dholakia July 28, 2007 – Appointed Expiry of the tenure
July 27, 2010 – Ceased
Keshav Saran July 28, 2007 – Appointed Expiry of the tenure
July 27, 2010 – Ceased
A.D. Fernando July 28, 2007 – Appointed Expiry of the tenure
July 27, 2010 – Ceased
J.N.L. Srivastava July 28, 2007 – Appointed Expiry of the tenure
July 27, 2010 – Ceased
U. Sundararajan July 28, 2007 – Appointed Expiry of the tenure
July 27, 2010 – Ceased
August 11, 2010 – Reappointed Reappointed by the Ministry of
Shipping
Nasser Munjee August 13, 2007 – Appointed Reappointed by the Ministry of
August 11, 2010 – Reappointed Shipping
Sushil Tripathi December 13, 2007 – Appointed Reappointed by the Ministry of
August 11, 2010 - Reappointed Shipping
J.N. Das December 24, 2007 – Appointed Appointed by the Ministry of Shipping
Vijay Chhibber December 26, 2008 – Appointed Appointed by the Ministry of Shipping
Capt. K.S. Nair November 3, 2008 – Appointed Appointed by the Ministry of Shipping
U.C. Grover August 31, 2010 - Ceased Superannuated

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Management Organizational Structure

BOARD OF DIRECTORS

CHAIRMAN AND MANAGING DIRECTOR

DIRECTOR, DIRECTOR,
FINANCE PERSONNEL &
ADMINISTRATION
DIRECTOR, DIRECTOR, DIRECTOR,
LINER & BULK TECHNICAL
PASSENGER CARRIERS & & OFFSHORE

EXECUTIVE SENIOR VICE PRESIDENT CHIEF


DIRECTOR, & COMPANY SECRETARY, VIGILANCE
INFORMATION
BOARD OFFICER,
TECHNOLOGY
SECRETARIAT VIGILANCE

VICE SENIOR VICE DEPUTY SENIOR VICE


PRESIDENT, PRESIDENT, GENERAL PRESIDENT,
PLANS & ISM & ISPS MANAGER, PURCHASE &
BILATERAL CELLS PUBLIC SERVICES
RELATIONS

Key Management Personnel

The following are the details of the key management personnel of the Company, as of the date of this Draft Red
Herring Prospectus:

M.B. Sagar, aged 50 years, is the chief vigilance officer of our Company. He joined our Company on January 4,
2008. M.B. Sagar holds a bachelor’s degree in Arts with honours in Economics and a master’s degree in Arts
with honours in Economics. He has held the position of Inspector, General Vigilance, Criminal Investigation
Department, Bhopal, Madhya Pradesh prior to joining the Company. M.B. Sagar was paid a remuneration of Rs.
1.14 million in Fiscal 2010. His term of office expires on September 30, 2020.

D.S. Kanvinde, aged 58 years, is the executive director of Personnel and Administration division of our
Company. He joined our Company on May 12, 1982. D.S. Kanvinde holds a bachelor’s degree in engineering
(civil) and a master’s degree in technology (structural). He has held the position of chief engineer officer in the
Company’s fleet prior to joining the Company’s offshore employment. D.S. Kanvinde was paid a remuneration
of Rs. 1.26 million in Fiscal 2010. His term of office expires on April 30, 2012.

S. Kannan, aged 58 years, is the executive director of the Internal Audit division of our Company. He joined our
Company on August 2, 1978. S. Kannan holds a bachelor’s degree in commerce and is a qualified Chartered
Accountant. He has held the position of internal auditor at M/s Sahwney Kivkund Private Limited prior to
joining the Company. S. Kannan was paid a remuneration of Rs. 1.24 million in Fiscal 2010. His term of office
expires on September 30, 2012.

Captain C.P. Athaide, aged 58 years, is the executive director of the Fleet Personnel division of our Company.
He joined our Company on August 1, 1982. Captain C.P. Athaide has completed one year in bachelor’s in
science and holds a certificate of Master (Foreign Going). He has held the position of master in the Company’s

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fleet prior to joining the Company’s offshore employment. Captain C.P. Athaide was paid a remuneration of Rs.
1.11 million in Fiscal 2010. His term of office expires on August 31, 2012.

Captain Sunil Thapar, aged 55 years, is the executive director of the Bulk Carrier and Chartering, bulk carrier
and tanker division of our Company. He joined our Company on August 21, 1987. Captain Sunil Thapar holds a
master’s degree in shipping management technology. He has held the position of captain in the Company’s fleet
prior to joining the Company’s offshore employment. Captain Sunil Thapar was paid a remuneration of Rs. 1.06
million in Fiscal 2010. His term of office expires on September 30, 2015.

J.V.S. Rao, aged 57 years, is the executive director of the Shipbuilding & Services, Technical and offshore
division of our Company. He joined our Company on June 6, 1988. J.V.S. Rao holds a bachelor’s degree in
mechanical engineering and holds a first class degree in MOT. He has held the position of chief engineer officer
in the Company’s fleet prior to joining the Company’s offshore employment. J.V.S. Rao was paid a
remuneration of Rs. 1.07 million in Fiscal 2010. His term of office expires on February 28, 2013.

Arun Kumar Gupta, aged 55 years, is the executive director of Technical Services (Fleet) Technical and
Offshore division of our Company. He joined our Company on February 14, 1989. Arun Kumar Gupta holds a
first class degree in MOT. He has held the position of chief engineer officer in the Company’s fleet prior to
joining the Company’s offshore employment. Arun Kumar Gupta was paid a remuneration of Rs. 1.23 million in
Fiscal 2010. His term of office expires on December 31, 2015.

P.K. Barman, aged 56 years, is a senior vice president, Bulk Carrier and Tanker division of our Company. He
joined our Company on August 14, 1989. P.K. Barman holds a first class degree in MOT. He has held the
position of chief engineer officer in the Company’s fleet prior to joining the Company’s offshore employment.
P.K. Barman was paid a remuneration of Rs. 0.99 million in Fiscal 2010. His term of office expires on August
31, 2014.

P.D. Anand, aged 54 years, is the senior vice president, Bulk Carrier and Tanker Comercial department, bulk
carrier and tanker division of our Company. He joined our Company on September 5, 1980. P.D. Anand holds a
bachelor’s degree in engineering and commerce and a diploma in business management. He has held the
position of probationary officer at Bank of Mysore. P.D. Anand was paid a remuneration of Rs. 0.99 million in
Fiscal 2010. His term of office expires on October 31, 2015.

R. Ahluwalia, aged 57 years, is the senior vice president, Bulk Carrier-Technical, Bulk Carrier And Tanker
division of our Company. He joined our Company on March 17, 1987. R. Ahluwalia holds a certificate for
Master (Foreign Going). He has held the position of master in the Company’s fleet prior to joining the
Company’s offshore employment. R. Ahluwalia was paid a remuneration of Rs. 0.997 million in Fiscal 2010.
His term of office expires on July 31, 2013.

Dipankar Haldar, aged 46 years, is the senior vice president, Legal Affairs and Company Secretary of the
Company. He joined our Company on November 1, 2001. Dipankar Haldar holds a bachelor’s degree in
Commerce (Hons.) and Law and is a Qualified Company Secretary. He has held the position of assistant vice
president at M/s Indusind Media & Communications prior to joining the Company. Dipankar Haldar was paid a
remuneration of Rs. 0.89 million in Fiscal 2010. His term of office expires on April 30, 2024.

E.C. Rao, aged 59 years, is the senior vice president, Technical Services department, Technical and Offshore
division of our Company. He joined our Company on February 1, 1989. E.C. Rao holds a bachelor’s degree in
mechanical engineering and a first class degree in MOT. He has held the position of chief engineer officer in the
Company’s fleet prior to joining the Company’s offshore employment. E.C. Rao was paid a remuneration of Rs.
1.02 million in Fiscal 2010. His term of office expires on April 30, 2011.

A. Chopra, aged 58 years, is the senior vice president, Container Services and Marketing Liner and Passenger
Services division of our Company. He joined our Company on May 1, 1983. A. Chopra holds a degree of
certificate for Master (Foreign Going). He has held the position of master in the Company’s fleet prior to joining
the Company’s offshore employment. A. Chopra was paid a remuneration of Rs. 1.06 million in Fiscal 2010.
His term of office expires on June 30, 2012.

S. G Bhalla, aged 57 years, is the senior vice president, Liner Technical and Coastal Passenger Services
Department, Liner and Passenger Services division of our Company. He joined our Company on December 27,
1988. S. G Bhalla has completed first year of master’s degree in engineering and holds a first class degree in

150
MOT. He has held the position of chief engineer officer in the Company’s fleet prior to joining the Company’s
offshore employment. S. G Bhalla was paid a remuneration of Rs. 1.14 million in Fiscal 2010. His term of office
expires on February 28, 2013.

U.D. Jejurikar, aged 53 years, is the senior vice president, Purchase and Services division of our Company. He
joined our Company on December 14, 1981. U.D. Jejurikar holds a bachelors degree in Arts and master’s degree
in science and business administration. He has had no work experience before joining the Company. U.D.
Jejurikar was paid a remuneration of Rs. 1.09 million in Fiscal 2010. His term of office expires on June 30,
2017.

S.N. Deshpande, aged 59 years, is the senior vice president, Information Technology division of our Company.
He joined our Company on July 17, 1981. S.N. Deshpande holds a bachelor’s degree in commerce and is a
qualified chartered accountant. He has held the position of accounts officer at Tata Iron and Steel Co. Ltd. prior
to joining the Company’s employment. S.N. Deshpande was paid a remuneration of Rs. 1.12 million in Fiscal
2010. His term of office expires on April 30, 2011.

Gupta Kaushalendra, aged 55 years, is a senior vice-president, Bulk Carrier and Tanker division in our
Company. He joined our Company on August 27, 1991. Gupta Kaushalendra holds a bachelor’s degree in
science and a master’s degree marine education and training (nautical) from World Maritime University. He is a
Master (Foreign Going) and has a diploma in ship board safety management. He has held the position of master
in the Company’s fleet prior to joining the Company’s employment. Gupta Kaushalendra was paid a
remuneration of Rs. 1.11 million in Fiscal 2010. His term of office expires on December 31, 2014.

S. Raychoudhary, aged 59 years, is a senior vice-president in our Company in our Kolkata office. He joined our
Company on April 27, 1979. S. Raychoudhary holds a bachelor’s degree in commerce and is a qualified
chartered accountant. S. Raychoudhary was paid a remuneration of Rs. 1.34 million in Fiscal 2010. His term of
office expires on January 31, 2011.

S. K. Maji, aged 51 years, is a senior vice-president, Freight and Port Operations department, Liner and
Passenger Services division in our Company. S. K. Maji joined our Company on May 2, 1983. S. K. Maji holds
a bachelor’s degree in engineering and a master’s degree in business administration from Indian Institute of
Management, Ahmedabad. S. K. Maji was paid a remuneration of Rs. 1.06 million in Fiscal 2010. His term of
office expires on July 31, 2019.

S. G. Sadwarti, aged 52 years, is a senior vice-president, ERP department, Information Technology Division in
our Company. He joined our Company on June 20, 1983. S. G. Sadwarti holds a bachelor’s degree in
engineering and a master’s degree in business administration from Indian Institute of Management, Bangalore.
S. G. Sadwarti was paid a remuneration of Rs. 1.16 million in Fiscal 2010. His term of office expires on May
31, 2018.

R. C. Chachada, aged 57 years, is a senior vice-president, Cash and Tax department, Finance and Accounts
division in our Company. He joined our Company on July 31, 1981. He holds a bachelor’s degree in commerce
and is a qualified chartered accountant. He has held the position of assistant internal auditor at New City of
Bombay Manufacturing Company Limited prior to joining the Company. Chachada R. C. was paid a
remuneration of Rs. 1.10 million in Fiscal 2010. His term of office expires on November 30, 2012.

K. Devdas, aged 53 years, is a senior vice-president, Technical and Offshore Services division in our Company.
He joined our Company on December 28, 1993. He is a Master (Foreign Going) and has a master’s degree in
business administration from Tamil Nadu Open University. He has held the position of master in the Company’s
fleet prior to joining the Company’s employment. K. Devdas was paid a remuneration of Rs. 1.01 million in
Fiscal 2010. His term of office expires on February 28, 2017.

S. Pahi, aged 55 years, is a senior vice-president, ISM & ISPS divisions in our Company. He joined our
Company on December 30, 1998. He is a Master (Foreign Going) and is a Master Mariner from LBS Nautical
and Engineering College, Mumbai. He has held the position of master in the Company’s fleet prior to joining
the Company’s employment. S. Pahi was paid a remuneration of Rs. 1.01 million in Fiscal 2010. His term of
office expires on June 30, 2015.

Prasanta Deb, aged 58 years, is a senior vice president, Bills and Shore Personnel Accounts and Coordination,
Finance and Accounts division in our Company. He joined our Company on September 21, 1979. Prasanta Deb

151
holds a bachelor’s degree in science and is a qualified chartered accountant. Prasanta Deb was paid a
remuneration of Rs. 1.02 million in Fiscal 2010. His term of office expires on February 29, 2012.

N Bandyopadhyay, aged 59 years, is a senior vice president, Business Development and Alliance in our
Company. He joined our Company on June 18, 1984. N Bandyopadhyay holds a bachelor’s degree in science
and a post graduate diploma in management from Xavier’s Labour Institure, Jamshedpur. He has held the
position of assistant manager at Price Waterhouse Coopers prior to joining the Company. N Bandyopadhyay
was paid a remuneration of Rs. 1.17 million in Fiscal 2010. His term of office expires on October 31, 2011.

B.B. Sinha, aged 53 years, is a senior vice president, SVC department, Bulk Carrier and Tanker division in our
Company. He joined our Company on August 1, 1994. B.B. Sinha is a Master (Foreign Going) and is an
associate member of the Institute of Chartered Ship Brokers. B.B. Sinha was paid a remuneration of Rs. 1.02
million in Fiscal 2010. His term of office expires on December 31, 2017.

N.R. Saraiya, aged 52 years, is a senior vice president, ERP department, Information Technology division in our
Company. He joined our Company on July 6, 1981. N.R. Saraiya holds a bachelor’s degree in commerce and is
a qualified chartered accountant. N.R. Saraiya was paid a remuneration of Rs. 1.15 million in Fiscal 2010. His
term of office expires on September 30, 2018.

S. Mandal, aged 49 years, is a regional senior vice president of our Company at Kolkata office. He joined our
Company on June 10, 1985. S. Mandal holds a bachelor’s degree in engineering (Chemistry) and a post graduate
diploma in management. S. Mandal was paid a remuneration of Rs. 1.24 million in Fiscal 2010. His term of
office expires on February 28, 2021.

All the key management personnel are permanent employees of the Company and none of the key management
personnel are related to each other.

Shareholding of Key Management Personnel

None of the key management personnel holds Equity Shares in the Company.

Bonus or profit sharing plan of the Key Management Personnel

The key management personnel are paid performance incentive pay based on certain performance parameters of
such key management personnel and the Company. In addition to the above, our key managerial personnel are
also entitled to receive certain benefits under the staff welfare schemes such as education assistance for their
dependent children, etc.

Interests of Key Management Personnel

The key management personnel of the Company do not have any interest in the Company other than to the
extent of the remuneration or benefits to which they are entitled to as per their terms of appointment,
reimbursement of expenses incurred by them during the ordinary course of business. All of the key management
personnel may also be deemed to be interested to the extent of any dividend payable to them and other
distributions in respect of the said Equity Shares.

None of the key management personnel have been paid any consideration or benefit of any nature from the
Company other than their remuneration.

Changes in the key management personnel

The changes in the key management personnel in the last three years are as follows:

Name Date of change Reason for change


A. Chopra June 5, 2007 Promoted as Senior Vice President
G. S. Bhalla June 5, 2007 Promoted as Senior Vice President
U. D. Jejurikar December 24, 2007 Promoted as Senior Vice President
S. N. Deshpande December 24, 2007 Promoted as Senior Vice President
Prasanta Deb September 24, 2008 Promoted as Senior Vice President
N. Bandhyopadhyay September 24, 2008 Promoted as Senior Vice President

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Name Date of change Reason for change
N. R. Saraiya September 24, 2008 Promoted as Senior Vice President
S. Mandal September 24, 2008 Promoted as Senior Vice President
Pahi S. February 22, 2010 Promoted as Senior Vice President
Devadas K. February 22, 2010 Promoted as Senior Vice President
R. C. Chachada February 22, 2010 Promoted as Senior Vice President
S. G. Sadawarti February 22, 2010 Promoted as Senior Vice President
S. K. Maji February 22, 2010 Promoted as Senior Vice President
S. Raychoudhary February 22, 2010 Promoted as Senior Vice President
Kaushalendra Gupta February 22, 2010 Promoted as Senior Vice President

Company’s policy on reservation

The Reservation Policy as detailed in Government guidelines are being maintained and implemented in the
Organisation. The reservation for recruitment of executives in open category are SC:15%, ST:7.5% and
OBC:27%. For other than open category the reservation is SC:16.66%, ST:7.5% and OBC:25.84%.

153
OUR PROMOTER

Our Promoter currently holds 80.12% of the pre-Issue paid-up equity share capital of our Company. As our
Promoter is the President of India acting through the Ministry of Shipping, disclosure of our ‘group companies’
as defined under Schedule VIII of the SEBI Regulations has not been provided.

154
DIVIDEND POLICY

The declaration and payment of dividend on our Equity Shares will be recommended by our Board and
approved by our shareholders, at their discretion, and will depend on a number of factors, including but not
limited to our profits, capital requirements, contractual obligations, restrictive covenants under our loan and
financing arrangements and the overall financial condition of our Company. The dividend and dividend tax paid
by our Company during the last three Fiscals are presented below:

Fiscal 2010 Fiscal 2009 Fiscal 2008


Face value of Equity Shares 10 10 10
(in Rs. Per Equity Share)
Dividend (in Rs. Million) 2,117.3 2,752.4 2,399.0
Dividend per Equity Share (Rs.) 5 6.5 8.5
Dividend Rate (%) 50 65 85
Dividend Tax (in Rs. Million) 352 468 408

The amounts paid as dividends in the past are not necessarily indicative of our dividend policy or dividend
amounts payable, if any, in the future.

155
SECTION V - FINANCIAL INFORMATION

FINANCIAL STATEMENTS

Report by Statutory Auditors on Restated Financial Information in Relation to Offer document

To
The Board of Directors
THE SHIPPING CORPORATION OF INDIA LIMITED
Shipping House,
245, Madame Cama Road,
Nariman Point,
Mumbai

Dear Sir,

1. We have examined the attached Restated Financial Information of The Shipping Corporation of India
Limited (the Corporation), as approved by the Committee of the Board of Directors of the Corporation
formed for this purpose, prepared in terms of the requirements of Paragraph B, Part II of Schedule II of
the Companies Act, 1956 (“the Act”) and the Securities and Exchange Board of India (Issue of Capital
and Disclosure Requirements) Regulations, 2009 as amended to date (ICDR Regulations) the Guidance
Note on Reports in Company Prospectuses (Revised ) issued by the Institute of Chartered Accountants
of India (ICAI) and in terms of our engagement agreed upon with you in accordance with our
engagement letter dated 03.09.2010 in connection with the ‘Further Public Offering’ (FPO) of Equity
Shares of the The Shipping Corporation of India Limited, Mumbai and equity offering by the Selling
Shareholder, the Government of India, in The Shipping Corporation of India Limited, Mumbai.

The preparation and presentation of these Restated Financial information is the responsibility of the
Corporation management.

2. This information has been extracted by the management from the financial statements for the quarter
ended 30th June 2010 audited by us and financial years ended 31st March 2010, 31st March 2009, 31st
March, 2008, 31st March 2007, and 31st March 2006 audited by the other auditors (Previous auditors).
Audits of the financial year ended 31st March 2010, 31st March 2009, 31st March 2008 and 31st March
2007 were conducted by M/s Khandelwal Jain & Co. and S Bhandari & Co., Chartered Accountants,
and for the year ended 31st March 2006 were conducted by M/s Ford, Rhodes, Parks & Co. and M/s
Karnavat & Co., being the auditors of the Corporation for the aforesaid years (Previous auditors), and
accordingly reliance has been placed on the financial statements audited by them for the aforesaid
years.

3. We have examined the Restated Financial Information of the Corporation for the quarter ended 30th
June 2010 and financial years ended on 31st March 2010, 31st March 2009, 31st March, 2008, 31st
March 2007, and 31st March 2006 prepared and approved by the Committee of the Board of Directors
of the Corporation formed for this purpose, for the purpose of disclosure in the offer document of the
Corporation.

4. The Restated Financial Information of the Corporation for the above period was examined to the extent
practicable; for the purpose of financial information in accordance with the Engagement Standard
issued by the Institute of Chartered Accountants of India. Those standards require that we plan and
perform the audit to obtain reasonable assurance whether the Restated Financial Information under
examination is free from material misstatements.

Based on the above, we report that in our opinion and according to the information and explanations
given to us, we have found the same to be correct and the same have been accordingly used in the
Restated Financial Information appropriately.

5. In accordance with the requirements of Paragraph B of Part-II of Schedule-II of the Act, the ICDR
Regulations, the Guidance Note and terms of our engagement agreed with you, we further report that
Financial Information comprising: -

156
a) The Restated Summary Statement of Assets and Liabilities of the Corporation as at 30th June
2010 and 31st March 2010, 31st March 2009, 31st March, 2008, 31st March 2007, and 31st
March 2006 as set out in Annexure-I;

b) The Restated Summary Statement of Profit & Loss Account of the Corporation for the quarter
ended 30th June 2010 and financial years ended 31st March 2010, 31st March 2009, 31st March,
2008, 31st March 2007, and 31st March 2006 as set out in Annexure-II; and

c) The Restated Cash Flow Statements of the Corporation for the quarter ended 30th June 2010
and financial years ended on 31st March 2010, 31st March 2009, 31st March, 2008, 31st March
2007, and 31st March 2006 as set out in Annexure-III;

to this report are after making such adjustments and regrouping as in our opinion are
appropriate and more fully described in ‘Details of the Adjustment made in Restated
Statement of Profit & Loss Account’ (Refer Annexure- IV –A) ‘Explanatory Notes for the
adjustment made’ (Refer Annexure – IV –B) and Significant Accounting Policies (Refer
Annexure – V)

Based on the above, and also as per reliance placed on the audited financial statement audited
by previous auditors, we are of the opinion that the Restated Financial Information have
been made in accordance with the ICDR Regulations, and after incorporating:

i. All the adjustments for incorrect accounting practices or failure to make provision or
other adjustment which resulted in audit qualification;

ii. Adjustments for the changes in accounting policies retrospectively in respective


financial years to reflect the same accounting treatment as per changed accounting
policy for the reporting periods;

iii. Adjustments for the material amounts in the respective financial years to which they
relate;

iv. There are no qualifications in the Audit Reports which remain to be adjusted in the
Restated financial information; and

v. There are no extra-ordinary items that need to be disclosed separately in the Restated
Financial Statements, except otherwise reported.

6. We have also examined the following other financial information set out in Annexure prepared by the
management and approved by the Committee of the Board of Directors of the Corporation formed for
this purpose for the quarter ended 30th June 2010 audited by us. In respect of financial years ended 31st
March 2010, 31st March 2009, 31st March, 2008, 31st March 2007, and 31st March 2006, these
information have been included based on reliance placed on the audited financial statement by previous
auditors:-

a. Statement of Dividend paid/proposed - Annexure-VI.

b. Statement of Accounting Ratios - Annexure-VII.

c. Statement of Capitalization as at June 30, 2010 - Annexure-VIII.

d. Statement of Secured and Unsecured Loans - Annexure-IX.

e. Statement of Revenue from Operations, Statement of Other income and Statement of O&M
Expenditure - Annexure-X (a), (b) and (c).

f. Statement of Tax Shelter - Annexure-XI.

g. Statement of Loan and Advances - Annexure-XII.

157
h. Statement of Sundry Debtors - Annexure-XIII.

i. Statement of Investments - Annexure-XIV.

j. Statement of Changes in Share Capital - Annexure-XV.

k. Statement of Related Party Transactions - Annexure-XVI.

l. Statement of Segment Reporting - Annexure- XVII.

m. Statement of Contingent Liabilities - Annexure-XVIII.

n. Statement of Fixed Assets – Annexure –XIX

o. Statement of Reserves & Surplus –XX

p. Statement of Current Liabilities & Provisions -XXI

In our opinion the Restated financial information contained in Annexure-VI to XXI of this report have
been prepared after making adjustments and regrouping as in our opinion were appropriate and more
fully described read along with ‘Details of the Adjustment made in Restated Statement of Profit & Loss
Account’ (Refer Annexure- IV –A) ‘Explanatory Notes for the adjustment made’ (Refer Annexure –
IV –B) and Significant Accounting Policies (Refer Annexure – V).

7. This report is intended solely for your information and for inclusion in the offer document in
connection with the proposed follow on public offering of the Corporation and should not be
used, referred to or circulated for any other purpose without our prior written consent.

For P.S.D. Associates For SARDA & PAREEK


Chartered Accountants Chartered Accountants
Firm Registration No 004501C Firm Registration No 109262W

(Prakash Sharma) (Niranjan Joshi)


Partner Partner
M. No. 072332 M. No. 102789

Place: Mumbai
Date: October 11, 2010

158
ANNEXURE - I
RESTATED SUMMARY STATEMENT OF ASSETS AND LIABILITIES
(Rs. in Million)
AS AT 30th June 31st 31st 31st 31st 31st
2010 March March March March March
2010 2009 2008 2007 2006
A. FIXED ASSETS
Gross Block 88,211 88,932 81,618 66,943 67,054 68,189
Less : Depreciation 43,427 43,786 43,248 40,351 37,324 35,590

Net Block 44,784 45,146 38,370 26,592 29,730 32,599


Assets under Construction 23,228 18,547 20,999 20,072 7,625 2,373
Assets held for Disposal * * * * - -

Total Fixed Assets 68,012 63,693 59,369 46,664 37,355 34,972

B. INVESTMENTS 1,799 1,667 1,115 415 240 90

C. CURRENT ASSETS,
LOANS & ADVANCES
Inventories 660 832 633 900 738 703
Sundry Debtors 4,377 3,437 4,371 3,983 3,452 3,853
Cash & Bank Balances 22,115 24,065 26,728 20,912 26,247 20,973
Deposit with Public 2,975 2,700 1,600 1,650 - 1,500
Financial Institutions
Other Current Assets 1,245 1,391 1,018 939 1,096 829
Amounts advanced to Joint 2,397 2,348 2,635 2,659 3,143 2,189
Venture Companies
Loans and Advances 3,587 3,199 3,314 2,949 3,261 4,778

Total Current Assets 37,356 37,972 40,299 33,992 37,937 34,825

LIABILITIES &
PROVISIONS

D. LOAN FUNDS
Secured Loans 29,158 26,969 24,717 14,542 12,447 13,744

E. CURRENT LIABILITIES
& PROVISIONS
Sundry Creditors & Other 9,135 9,301 9,792 8,687 11,325 10,542
Liabilities
Provisions 3,432 3,406 4,068 1,999 648 1,907

Total Current Liabilities 12,567 12,707 13,860 10,686 11,973 12,449


& Provisions

F. NET WORTH 65,442 63,656 62,206 55,843 51,112 43,694

Represented by:
Share Capital 4,235 4,235 4,235 2,823 2,823 2,823
Reserves & Surplus 61,207 59,421 57,971 53,020 48,289 40,871

Net Worth 65,442 63,656 62,206 55,843 51,112 43,694


* (Rs.0.2 Millions)

159
ANNEXURE - II
RESTATED SUMMARY STATEMENT OF PROFIT AND LOSS ACCOUNT
Rs. in Million
Period / Year ended on 30th 31st 31st 31st 31st 31st
June March March March March March
2010 2010 2009 2008 2007 2006
A. INCOME
Operating Earnings 9,129 34,666 41,635 37,390 37,176 36,137
Profit on sale of Ships (Net) 155 1,225 345 - 827 121
Interest Income 426 2,182 2,727 2,277 2,197 1,726
Other Income 179 327 769 73 227 248
Excess provision/Sundry credit 62 662 102 578 1,582 244
balances written back
Total 9,951 39,062 45,578 40,318 42,009 38,476
B. EXPENDITURE
Operating Expenses 6,275 27,646 28,103 25,939 25,601 21,386
Administration Expenses 531 1,989 2,050 1,824 1,352 1,262
Other Expenses, Provisions etc. 29 161 538 335 220 110
Interest 123 525 647 609 801 791
Depreciation 1,016 3,814 3,252 3,028 2,916 3,036
Total 7,974 34,135 34,590 31,735 30,890 26,585
C. PROFIT BEFORE 1,977 4,927 10,988 8,583 11,119 11,891
EXTRAORDINARY ITEMS
D. EXTRAORDINARY ITEMS:
Less : Provision towards loss of Ship - - 214 - - -
/ other incidental charges
Less : Provision towards NYSA - - 39 138 - -
USA pension liability due to exit
from IDX Service
E. PROFIT BEFORE TAX 1,977 4,927 10,735 8,445 11,119 11,891
Provision for Indian Income Tax
- Current 190 993 1,100 860 929 695
- Fringe Benefit Tax - - 40 39 29 30
F. PROFIT AFTER TAX 1,787 3,934 9,595 7,546 10,161 11,166
Less: Transferred to Tonnage Tax - 800 2,000 1,700 2,250 3,000
Reserve u/s 115VT of Income Tax
Act
G. BALANCE 1,787 3,134 7,595 5,846 7,911 8,166
Add : Balance brought forward from 5,034 4,817 4,119 5,915 4,970 3,548
last year
H. AMOUNT AVAILABLE FOR 6,821 7,951 11,714 11,761 12,881 11,714
APPROPRIATION
Appropriations
Staff Welfare Fund - 10 8 7 6 6
Corporate Social Responsibility - 38 94 - - -
Reserve
Capital Reserve - - 75 28 223 1
General Reserve - 400 3,500 4,800 4,000 4,000
Interim Dividend - - - 1,270 2,400 2,400
Tax on Interim Dividend - - - 216 337 337
Proposed Dividend - 2,117 2,752 1,129 - -
Tax on Proposed Dividend - 352 468 192 - -
I. BALANCE CARRIED TO 6,821 5,034 4,817 4,119 5,915 4,970
BALANCE SHEET

160
ANNEXURE - III

RESTATED CASH FLOW STATEMENT

(Rs. in Millions)
Period / Year 30.06.2010 31.03.2010 31.03.2009 31.03.2008 31.03.2007 31.03.2006
ended
(A) CASH FLOW
FROM
OPERATING
ACTIVITIES
Net profit before 1,977 4,927 10,735 8,445 11,119 11,891
Tax
ADJUSTMENTS
FOR :
Depreciation 1,016 3,814 3,252 3,028 2,916 3,036
Interest Income (426) (2,182) (2,727) (2,277) (2,197) (1,726)
Interest paid 123 525 647 609 801 791
Dividend Received 0 (23) (21) (19) (93) (20)
Surplus on sale of 0 0 (2) (35) (1) (3)
Fixed Assets (other
than ships)
Surplus on Sale of (155) (1,225) (345) 0 (827) (121)
Ships
Provision for 0 27 449 66 18 (42)
doubtful debts &
Advances (Net)
Debts & Advances 0 1 0 177 1 1
written off
Sundry credit (4) (33) (17) (259) (596) (5)
balances written
back
554 904 1,236 1,290 22 1,911
Operating profit 2,531 5,831 11,971 9,735 11,141 13,802
before working
capital changes
Adjustments for :
Increase in working
capital
(a) Trade & other (850) 797 (1,339) (202) 2,155 (1,409)
receivables
(b) Inventories 172 (199) 267 (162) (36) (198)
(c) Trade payables (135) (195) 1,223 120 (2,558) (1,645)
(a)+(b)+(c) (813) 403 151 (244) (439) (3,252)
Cash generated from 1,718 6,234 12,122 9,491 10,702 10,550
operations
Tax paid (Net of (182) (1,004) (1,070) (1,022) (1,151) (360)
Refunds)
Net Cash From (A) 1,536 5,230 11,052 8,469 9,551 10,190
Operating Activities

(B) CASH FLOW


FROM INVESTING
ACTIVITIES
Purchase / (5,336) (8,140) (15,940) (12,339) (5,314) (4,432)
Acquisition of Fixed
Assets (including
Assets under
construction)

161
Period / Year 30.06.2010 31.03.2010 31.03.2009 31.03.2008 31.03.2007 31.03.2006
ended
Investment with (275) (1,100) 0 (1,650) 0 (1,500)
Public Financial
Institutions
Receipts from 0 0 50 0 1,500 0
Maturity of
Investments
Sale of Fixed Assets 156 1,227 329 37 841 136
Income from 39 190 199 199 299 357
Investments
Interest Received 258 1,936 2,431 2,132 1,902 1,378
Sale / Purchase of (133) (552) (700) (175) (150) (75)
Investments
Advances to Joint (266) 229 71 417 (925) (157)
Venture Companies
Net cash used in (B) (5,557) (6,210) (13,560) (11,379) (1,847) (4,293)
investing activities

C) CASH FLOW
FROM
FINANCING
ACTIVITIES
Loans Borrowed 2,190 2,252 10,175 2,095 (1,297) (283)
(Net of Repayments)
Dividends Paid 0 (3,219) (1,323) (3,884) (338) (2,734)
(Incl. Dividend Tax)
Interest Charges (117) (701) (516) (628) (789) (758)
Staff Welfare (1) (8) (12) (8) (6) (6)
Activities (Net)
Corporate Social (1) (7) 0 0 0 0
Responsibility
Activities

Net cash flow from (C) 2,071 (1,683) 8,324 (2,425) (2,430) (3,781)
financing activities

NET INCREASE / (A+B (1,950) (2,663) 5,816 (5,335) 5,274 2,116


(DECREASE) IN +C)
CASH & CASH
EQUIVALENTS

Cash & cash 24,065 26,728 20,912 26,247 20,973 18,857


equivalents at the
beginning of the
Year
Cash & cash 22,115 24,065 26,728 20,912 26,247 20,973
equivalents at the
end of the Year.

162
ANNEXURE - IV-A

DETAILS OF ADJUSTMENT MADE IN RESTATED SUMMARY STATEMENT OF PROFIT AND


LOSS

Rs. in Million
Period / Year ended on 30th 31st 31st 31st 31st 31st
June March March March March March
2010 2010 2009 2008 2007 2006
A. PROFIT AFTER TAX AS PER 1,998 3,769 9,407 8,139 10,146 10,422
AUDITED STATEMENT OF
ACCOUNTS
B. ADJUSTMENTS -
1. Adjustment for qualifications
Extraordinary items
a. Refer Note No. A (3) of Annexure No. - - 138 (138) - -
IV in respect of Multiemployer Pension
plan liability - NYSA USA
Other items
b. Refer Note No. A (1) of Annexure No. - - - - - 92
IV in respect of accounting of Charter
hire earning in advance
c. Refer Note No. A (2) of Annexure No. - - 72 (4) (68) -
IV in respect of arrears of wages

2. Changes in Accounting policies


a. Refer Note No. B (1) of Annexure No. - - - - - (46)
IV in respect of accounting of
Employee's Benefits on adoption of
Revised AS-15
b. Refer Note No. B (2) of Annexure No. - - - (411) - -
IV in respect of accounting of
Exchange Gain / losses
c. Refer Note No. B (3) of Annexure No. - - - (1) (2) (1)
IV in respect of change in depreciation
method on Computer software
d. Refer Note No. B (4) of Annexure No. (3) (13) (13) (13) 117 -
IV in respect of accounting for
additions made to vessels involving
structural changes
e. Refer Note No. B (5) of Annexure No. - - - 6 (2) 48
IV in respect of accounting for dry dock
expenditure

3. Other Material Adjustments


a. Refer Note No. C (1) of Annexure No. - - - - 46 118
IV in respect of accounting of expenses
deferred
b. Refer Note No. C (3) of Annexure IV in (208) 180 (8) (35) (72) 529
respect of Prior Year income and
expense
c. Tax impact on adjustment - (2) (1) 3 (4) 4
C. Total Adjustments (211) 165 188 (593) 15 744
D. ADJUSTED PROFIT 1,787 3,934 9,595 7,546 10,161 11,166
Less: Transferred to Tonnage Tax - 800 2,000 1,700 2,250 3,000
Reserve
u/s 115VT of Income Tax Act
E. BALANCE 1,787 3,134 7,595 5,846 7,911 8,166

163
ANNEXURE – IV-B

EXPLANATORY NOTE FOR THE ADJUSTMENT MADE IN RESTATED FINANCIAL


STATEMENT:

A Adjustment for Qualifications:-

1. The Corporation has accounted Chartered hire earnings of Rs. 92 Million in advance during the year
ending 2004-05. Necessary adjustment has been carried out in restated accounts by reducing the
opening reserve and increasing the operating income during the year 2005-06.

2. Consequent to an award of the Tribunal constituted under section 150 (1) of the Merchant Shipping
Act, 1958, the corporation incurred liability of Rs. 68 Millions in 2006-07 and Rs. 4 Million in 2007-
08, being amount payable to catering staff on board OSV (who are not the employees of the
Corporation) as arrears of wages with retrospective effect from 17th April 2000. This remains un-
provided during 2006-07 & 2007-08. The Corporation has made required provision of Rs. 72 Million in
2008-09. Necessary adjustment in this regard has been carried out in the restated accounts by
increasing the other expenditure and provision for the year by Rs. 68 Million in 2006-07, Rs. 4 Million
in 2007-08 and reducing the same in 2008-09. The corresponding effect of the same has been given to
provisions.

3. No liability under the provisions of the Multiemployer Pension Plan Amendment Act of 1980 (New
York) on withdrawal from India/USA East Coast Service (IDX Service) has been provided in the
accounts during the year 2007-08, A sum of Rs. 177 Million has been provided by the Corporation
during 2008-09 and disclosed as Extraordinary item. Necessary adjustment in this regard has been
carried out in restated accounts in 2007-08 by increase in the Expenses as extraordinary item and
consequential increase in liability by Rs. 138 Million. In 2008-09 a sum of Rs. 39 Million has been
retained in expenses which relates to the year 2008-09.

B. Adjustment for Change in Accounting Policies:-

1. Consequent to change in AS-15 "Employees Benefits" with effect from 1st April 2006, the Corporation
has adjusted opening reserve by Rs. 7 Million as per transitional provision during the year 2006-07
being the difference of the liability accounted on account of Post Retirement Medical Scheme (PRMS)
Rs. 135 Million and assets accounted towards excess provision made for Gratuity Rs. 128 Million.
Based on the actuarial valuation report of 2005-06, in compliance with revised AS-15, the opening
balance of Reserve has been increased by Rs. 39 Million as on 1st April 2005 representing net
difference between excess provision of Gratuity by Rs. 167 Million and provision required against
PRMS of Rs. 128 million, relating to period prior to 1st April 2005. Further a sum of Rs. 38 Million
and Rs. 8 Million has been considered as expenses on account of Gratuity under the head Operating
expenses and on account of PRMS Scheme under the head administrative expenses during the year
2005-06.

2. During the year 2007-08 , in view of notification issued by Ministry of Corporate Affairs dated 7th
December, 2006 prescribing the Companies (Accounting Standards) Rules 2006, the corporation has,
with effect from 1st April, 2007, changed the accounting policy relating to recognition of foreign
exchange fluctuation on repayment and conversion of liabilities pertaining to long term loans for fixed
assets acquired from a country outside India, arising out of transactions entered into on or after 1st
April, 2004. Consequently such foreign exchange fluctuation (loss/gain) has been charged / credited to
the Profit and Loss Account, except to the extent they are regarded as an adjustment to the interest cost
during the period of construction, which till previous year was adjusted to carrying value of respective
assets. During the year 2008-09, the Corporation has exercised the option available vide Notification
No. GSR 225(E) dated 31st March 2009 issued by the Ministry of Corporate Affairs under section 211
(3C) of the Companies Act, 1956 relating to Accounting Standard 11 “The Effect of Changes in
Foreign Exchange Rates” and accordingly the exchange difference arising on repayment of liabilities
and conversion of year-end foreign currency balances in respect of such long term loans relating to
acquisition of depreciable capital assets arising out of transactions entered on or after 1st April 2004
has been adjusted to the cost of the respective asset/ assets under construction which was hitherto
recognised in the Profit & Loss Account except to the extent that they were regarded as an adjustment
to the interest cost during the period of construction. Hence necessary adjustment in this regard has

164
been made during the year 2007-08, by reducing the gross block of the assets by Rs. 429 Million
representing exchange gain on such loans and consequently depreciation has been reduced by Rs. 18
Million, and profit for the year reduced by Rs. 411 Million.

3. During the year 2007-08, in accordance with Accounting Standard 26 “Intangible Assets”, the
corporation has changed the accounting policy for amortisation of computer software over the useful
life not exceeding five years, which till previous year was being charged on Written Down Value
Method at the rates applicable to computer hardware prescribed in ‘Schedule XIV’ to the Companies
Act 1956. Necessary adjustment in this regard has been carried out as a result the depreciation has been
increased by Rs. 1 Million in 2005-06 and Rs. 2 Million in 2006-07 and Rs.1 Million in 2007-08.
Consequently assets have been reduced to that extent respectively. Further opening reserve has been
increased and accumulated depreciation as on 1st April 2005 has been increased by Rs. 4 Million
respectively in restated accounts.

4. The Corporation has changed the policy in respect of additions made involving structural changes, on
or after 1st April 2007, resulting in extension of useful life based on the technical evaluation. The
depreciation on such additions is provided over the extended remaining useful life (not less than rates
prescribed in schedule XIV), which was previously fully depreciated in the year of addition. Though no
adjustment in this regard is required in the restated accounts of 2005-06, necessary adjustment has been
carried out in restated accounts of 2006-07 and based on technical evaluation of extended useful life,
depreciation expenses of Rs. 117 Million has been reversed and the accumulated depreciation has
decreased to that extent . Consequent to such adjustment, depreciation expenses have been increased
from 2007-08 to 2009-10 by Rs. 13 Million and the accumulated depreciation has also increased to that
extent. In the restated accounts for quarter ended 30th June 2010, the depreciation & accumulated
depreciation has increased by Rs.3 million.

5. Prior to 2008-09, the dry dock repair expenditure was recognized only on completion of entire dry dock
jobs. From the year 2008-09 onwards such expenditure is recognized to the extent of work done based
on technical evaluation. Though there was no impact on profit during the year 2008-09 due to the
change in policy, necessary adjustment has been carried out in the restated financials by reducing the
opening reserve by Rs. 52 Million as on 1st April, 2005 equivalent to the unaccounted expenditure of
the year 2004-05, decreasing the dry-dock expenditure by Rs. 48 Million and 6 Million in 2005-06 and
2007-08 respectively and increasing the same by 2 Million in 2006-07. The corresponding impact of
the same has been given in sundry Creditors & Other liabilities.

C. Other Material Adjustments:-

1. Prior to 2005-06, the Corporation had a policy of deferring major revenue expenses like extensive steel
renewals, structural alterations, replacement of major equipments etc. involving an expenditure above
Rs. 5 Million, on each vessel, including on those which had completed their normal life and where the
benefit was expected to accrue over an extended period. Such expenses were written off over a period
of three to five years or the remaining useful life of the vessel depending upon the nature of each case.
Further, the Corporation had paid some compensation under a Voluntary Retirement Scheme prior to
2005-06 which was being written off in five equal instalments commencing from the year in which it
was incurred. A portion of such deferred revenue expenditure was written off during 2005-06 & 2006-
07. Necessary adjustments in this regard have been carried out by decreasing the Opening Reserves as
on 1st April, 2005 by 164 million being the amount of unamortised deferred revenue expenditure as on
31st March, 2005. Further, the Operating Expenses and Administration Expenses have been reduced by
Rs. 75 million and Rs. 43 million in 2005-06 and Rs. 17 million and Rs. 29 million in 2006-07. The
corresponding impact of this adjustment has been given by reducing the unamortised Miscellaneous
expenditure to that extent.

2. Current Assets and Current Liabilities which were wrongly netted off have been increased by Rs. 337
Million as on 31st March 2006.

3. Prior year income and expenses has been adjusted in the respective years in restated financial statement
based on detailed scrutiny carried out by the management which resulted in decrease in opening reserve
by Rs. 386 million.

165
OTHER MATERIAL NOTES ON RESTEATED FINANCIAL STATEMENT

1. The Corporation has written back sundry credit balances based on a review undertaken of old
outstanding Sundry Creditors. The year-wise details of the same are as follows:

Year / Period Rs. in Million


2005-06 5
2006-07 596
2007-08 259
2008-09 17
2009-10 33
Three months ended on 30th June 2010 4

2. The corporation has written back the excess provision of the expenditure / provisions as under:

Year / Period Rs. in Million


2005-06 239
2006-07 986
2007-08 319
2008-09 84
2009-10 629
Three months ended on 30th June 2010 58

The management explained that the reversal of the provision represent excess provision of the
expenditure, which has been reversed after settlement of respective liability / provision in ordinary
course of the business only in the year of settlement.

3. Borrowing cost & interest capitalised is detailed here under:

Year / Period Rs. in Million


2005-06 31
2006-07 118
2007-08 525
2008-09 289
2009-10 151
Three months ended on 30th June 2010 369

4. As per accounting policy followed by the Corporation, any voyage which does not fulfil the criteria of
finished voyage defined in the Accounting Policy Note No. 2 (c), is treated as an unfinished voyage.
Amount received on account of freight and other charges in respect of such voyages are carried forward
as Unfinished Voyage Earnings under the head "Sundry Creditors & Other Liabilities". Direct
operating expenses incurred for such voyages including hire and freight for vessels chartered-in are
carried forward as Unfinished Voyage Expenses in assets under the head Other Current Assets.

The details of assets represented by unfinished voyage expenses and liabilities recognised representing
amount of freight earnings by unfinished voyage are given here under:

Rs. in Million
Year / Period Unfinished Voyage Expenses Unfinished Voyage Expenses income
included in Other Current Assets included in Creditors & Other
liabilities
2005-06 456 327
2006-07 688 271
2007-08 588 258
2008-09 547 158
2009-10 852 376
3 months ended on 552 118
30th June 2010

166
5. The Corporation had paid Service Tax on operation and maintenance of vessels for Oil & Natural Gas
Corporation (ONGC) relating to financial year 2005-06 amounting to Rs. 164 Million. As per ONGC’s
request the company preferred refund claim which has been rejected initially by the Asst.
Commissioner/Commissioner of Service Tax (Appeals), the appeal for the same is pending with
CESTAT. Reimbursement preferred by the Corporation on ONGC has been disputed. As per the
contractual agreement ONGC is liable to pay to SCI actual expenses incurred by it on behalf of ONGC,
including service tax, etc. as applicable and accordingly, the amount is recoverable from ONGC.

6. Pending implementation of the Pay Revision of Corporation’s employees retrospectively from 1st Jan
2007, the Corporation has made adequate provision in the account as per management decision based
on DPE OM letter dated 26th November, 2008. Cumulative provision in this regard stand at Rs. 949
Million as on 30th June 2010.

7. In view of opting for Tonnage Tax scheme under Income Tax Act 1961, provision for income tax
liability is made as per special provisions relating to income of shipping companies from financial year
2004-05, and accordingly no provision is required for deferred tax. Consequently, no such deferred tax
assets and Deferred Tax liability is accounted.

8. Estimated amount of contract on capital account, remaining to be executed and hence not provided for
(Net of Advance)

Year / Period Rs. in Million


2005-06 9,224
2006-07 29,701
2007-08 46,725
2008-09 59,979
2009-10 50,286
Three months ended on 30th June 2010 47,717

9. Service tax department has issued show cause notices to the corporation proposing to impose levy of
service tax under the category of “Storage and Warehousing Service” aggregating to (a) Rs.268 million
for the period from 01/10/2002 to 31/12/2007 (b) Rs. 75 Million for the period from 01/01/2008 to
31/01/2009 and (c) Rs. 40 Million for the period from 01/02/2009 to 30/09/2009 and also interest and
penalty alleging that corporation has provided storage & warehousing services to (ONGC) in respect of
vessels given to ONGC under Time Charter arrangement. According to the management, Service Tax
is not leviable for such chartering arrangement and therefore the Corporation has challenged the
applicability of the Service Tax and has not accepted the liability towards Service Tax.

10. Contingent liabilities not provided for:

It includes (a) Claim against the Corporation not acknowledge as debts (b) Forfeiture of Earnest Money
deposit, Cargo loss, Freight, Demurrage, Slot Payments, Fuel Cost, Other operational claim and custom
duty disputed demand (As certified by the Management) (c) Guarantees given by the Bank on behalf of
Corporation (d) undertaking cum indemnity bond given by corporation (e) Cargo Claim Covered by
P&I Club (f) Bond undertaking given by Corporation to custom authorities (g) Corporate Guarantees/
undertakings.

Year / Period Rs. in Million


2005-06 3,597
2006-07 3,675
2007-08 3,840
2008-09 2,984
2009-10 3,795
Three months ended on 30th June 2010 3,910

The Contingent Liability in respect of Corporate guarantees / undertakings given in respect of Joint
venture is not ascertainable.

167
11. The Corporation entered in to a joint venture agreement with the Steel Authority of India Limited, with
participating interest in the ratio of 50:50, and promoted a company SAIL SCI Shipping Private
Limited. The said company was incorporated on 19th May 2010, with an authorised Capital of 1700
Millions. The Corporation has subscribed equity capital of Rs. 0.5 Million. Pending remittance towards
the subscribed capital the same has not been considered as an investment and the corresponding
liability has not been booked.

13. Sethusamudram Corporation Ltd., (SCL), a Special Purpose Vehicle was incorporated on 06.12.2004 at
Chennai (for developing the Sethusamudram Channel Project) with M/s. Tuticorin Port Trust, Ennore
Port Ltd. Co., M/s. Visakhapatnam Port Trust, M/s. Chennai Port Trust, Dredging Corporation of India
Ltd., M/s. Paradip Port Trust and the Corporation as the shareholders. The Corporation received advice
from Government of India for participating in the proposed project. Accordingly Corporation agreed to
participate for an investment not exceeding Rs. 500 Million in the project. The Corporation has made
its contribution of Rs.500 Million as equity participation in SCL.

14. Previous year's figures along with related financial years of the earlier year's, as may be required have
been reclassified regrouped wherever necessary to confirm to current year classification.

168
ANNEXURE - V

A.1 SIGNIFICANT ACCOUNTING POLICIES

(a) ACCOUNTING CONVENTION:-

The financial statements are prepared to comply in all material aspects under the Historical Cost
convention and in accordance with generally accepted Accounting principles in India and the relevant
provisions of the Companies Act, 1956, including accounting standards notified there under :-

(b) USE OF ESTIMATES:-

The preparation of financial statements requires estimates and assumptions that affect the reported
amount of assets, liabilities, revenue and expenditure during the reporting period. Although such
estimates and assumptions are made on reasonable and prudent basis taking into account all available
information, actual results could differ from these estimates and assumptions and such differences are
recognised in the period in which results are crystallised.

RECOGNITION OF REVENUE AND EXPENDITURE :-

(a) The Profit & Loss Account reflects,

(i) The Earnings and Direct Operating Expenses (Voyage related variable costs) in respect of all
Finished Voyages on accrual basis.

(ii) Standing Charges (Vessel related Fixed Costs) for all the vessels for the entire period of
operation during the year on accrual basis.

(iii) Income and Expenditure in respect of the customs penalty claims, and container detention
charges which are accounted for on realisation.

(iv) In respect of slot sharing agreement with other shipping lines, the earnings and expenses on
accrual basis based on completed voyage cycle during the year.

(v) In respect of time charter arrangements, incomes and expenses are booked on accrual basis.

(vi) Demurrage income is recognised on estimated basis, based on past experience of settlements.

(b) The criteria followed for the purpose of determining the Finished Voyages are as under:-

(i) Passenger cum Cargo Vessels:- Disembarkation of passengers and discharge of cargo should
be completed on or before the last date of the financial year.

(ii) Cargo Vessels (other than those serviced by Feeder or Daughter Vessels):- Discharge of cargo
should be completed on or before the last date of the financial year.

(iii) Cargo vessels serviced by Daughter vessels:- The ultimate discharge of cargo by all daughter
vessels should be completed on or before the last date of the financial year.

(iv) Cargo vessels serviced by feeder vessels:- The discharge of cargo at the transhipment port by
the mainline and own feeder vessels should be completed on or before the last date of
financial year. Transhipment port is the point of commencement and completion of both the
services. The completion of the mainline and feeder voyage is determined independent of each
other.

(v) Cellular Liner Service: - On completion of round voyage

169
(c) Unfinished Voyages:-

Any voyage, which does not fulfil the above mentioned criteria, is treated as an unfinished voyage.
Amount received on account of freight earning and other charges in respect of such voyages are carried
forward as Unfinished Voyage Earnings. Direct operating expenses incurred for such voyages
including hire and freight for vessels chartered-in are carried forward as Unfinished Voyage Expenses
except in case of time charter.

(d) Allocation of Container Expenses:-

Expenses relating to container activities such as stevedoring, stuffing and destuffing, transportation,
etc. are identified with the relevant voyage and classified as direct operating expenses. Expenses such
as container hire, kobi charges, ground rent and handling of empty containers, etc., which are not
directly identifiable with any particular voyage are allocated to all voyages on the basis of unit days for
each voyage. The sum so allocated to unfinished voyages is carried forward as Unfinished Voyage
Expenses.

3. FIXED ASSETS AND DEPRECIATION:-

a) Fixed Assets are stated at cost of acquisition less accumulated depreciation. Cost includes
borrowing cost, duties and other expenses relating to acquisition of assets.

b) Depreciation on ships is charged on “Straight Line Method” at the rates prescribed in


Schedule XIV to The Companies Act, 1956 except in cases of Offshore Vessels, which are
written off over a period of 12 years and second hand vessels, which are written off over their
respective useful lives (not less than rates prescribed in Schedule XIV) as determined by
Technical evaluation.

On additions made to the existing ships (including adjustments resulting on account of


exchange rate fluctuation) depreciation is provided for the full year irrespective of the date of
addition and balance over the remaining useful life of the ships.

Additions made to the ships which have completed their useful life are fully depreciated in the
year of addition. However, in respect of additions made involving structural changes, on or
after 1st April 2007, resulting in extension of useful life based on the technical evaluation, the
depreciation is provided over the extended remaining useful life (not less than rates prescribed
in schedule XIV).

c) On assets other than ships, depreciation is charged on the “Written Down Value Method” as
per the rates prescribed in Schedule XIV to the Companies Act, 1956 for the full year
irrespective of the dates of additions and no depreciation is being charged on assets
sold/discarded during the year.

d) Computer software is amortised over the useful life not exceeding five years.

e) Assets costing individually Rs.5,000/- and below are fully depreciated in the year of addition.

f) The carrying amounts of assets are reviewed at each Balance Sheet date for impairment so as
to determine the provision for impairment loss, if any, required, or the reversal, if any,
required of impairment loss recognised in previous periods.

4. CAPITALISATION OF EXPENSES

Interest and other expenses, incurred till the date of first loading, on amounts borrowed for
acquisition/improvement of assets, are charged to the cost of respective assets acquired/improved. In
addition, operating costs including initial stores and spares of newly acquired ships till the port of first
loading are added to the cost of the respective ship.

170
5. RETIREMENT AND DISPOSAL OF SHIPS

(a) Ships which have been retired from operations for eventual disposal are withdrawn from the
fixed assets and exhibited separately at book value in the Balance Sheet under “Ships Retired
From Operation”.

(b) Anticipated loss, if any, in the disposal of such ships is recognised immediately and provision
for the same is made in the accounts for the year in which these have been retired. For the
purpose of determining the loss, the sale price is recognised, if contract for sale is concluded.
In other cases, assessment of the realisable value is made on the basis of the prevailing market
conditions. Losses on such ships are provided for after taking into account the expenses such
as customs duty, sales tax / value added tax, etc. in connection with the disposal, as well as
estimated expenses in maintaining the ship, till its sale. Wherever the exact amount under each
item of expenses is not known, an assessment is done on the best estimate basis.

(c) Profits on sale of ships are accounted for only upon completion of sale thereof.

6. MAJOR REPAIRS AND RENEWALS OF SHIPS

(i) Advances given towards repairs/renewals of capital/revenue nature, are adjusted only on
completion of the entire work duly certified by the concerned Authority.

(ii) Drydock repair expenditure are recognised in the Profit & Loss account to the extent work is
done, based on technical evaluation.

7. VALUATION OF STOCKS:-

(a) Inventories are valued at lower of cost and net realisable value unless otherwise stated.

(b) Fuel oil purchases are initially booked as stock. The value of year-end stock is arrived at after
charging consumption on ‘First-in-First-out’ method.

(c) As regards provisions purchased for victualling on board the ships, where catering is under
departmental catering system, all purchases are treated as consumed.

(d) Corporation maintains godowns for keeping certain limited items of stores pending issue to
the ships. Stock of stores lying in the godowns at the year end are valued at lower of cost or
net realisable value.

(e) Store/Spares including paints, etc. are charged to revenue as consumed when delivered to
ships. Items of Stores/Spares, which are not delivered to ships are shown under Stores/Spares-
in-Transit and are treated as stock. Such stocks are valued at lower of cost and net realizable
value. However, at the end of the financial year, provision for consumption is made for items
which remain as Stores/Spares in transit for more than three months.

8. ACCOUNTING OF FOREIGN CURRENCY TRANSACTIONS:-

(a) All transactions during the year are booked at rate of the last Friday of the preceding month
published in Financial Times, London.

(b) Liner freight is booked at rates referred to in (a) above relevant to the months in which the
dates of sailing fall.

(c) The year-end foreign currency balances other than in US Dollars appearing in the books of
account are converted into US Dollars at the rate of the last Friday of March published in the
Financial Times, London and thereafter, the monetary assets and monetary liabilities as well
as the Long Term Loans are converted into rupees at SBI Mean Rate prevailing at the end of
the financial year.

171
(d) Exchange difference arising on repayment of liabilities and conversion of year-end foreign
currency balances pertaining to long term loans for acquiring ships/ownership containers/other
assets and asset under construction is adjusted in the carrying cost of ships/ownership
containers/other assets and asset under construction.

(e) The exchange difference arising on revenue and other account except as stated under (d)
above is adjusted in the Profit & Loss Account.

9. EMPLOYEE BENEFITS:-

(a) Liabilities towards provident fund are accounted for on accrual basis.

(b) For defined benefit plans, in case of shore staff, officers afloat, and crew on Company’s roster,
the cost of providing benefits is determined using the projected unit credit method, with
actuarial valuations being carried out at each balance sheet date. Actuarial gains and losses are
recognised in full in the profit and loss account for the period in which they occur. The
retirement benefit obligation recognised in the balance sheet represents the present value of
defined benefit obligation as reduced by the fair value of the plan assets. Any asset resulting
from this calculation is limited to the present value of available refunds and reduction in the
future contribution to the plan.

(c) In case of crew on the general roster, gratuity, which is insignificant in value, is accounted on
cash basis.

10. INSURANCE, P&I AND OTHER CLAIMS:-

(a) Provision in respect of claims against the Corporation and covered by Insurance and P&I risks
is made as under:-

i. In respect of claims falling under Hull & Machinery Insurance, which are estimated
to be above the deductible limit, to the extent of deductible limit.

ii. In case of Cargo claims, on the basis of the actual claims registered and/or paid
pertaining to the relevant year’s voyages as ascertained at the year-end as reduced by
the amounts recoverable from the insurers.

(b) All types of claims settled and paid above the deductible limits are shown as recoverable from
Hull Underwriters / P&I Clubs until these are finally accepted by them as per the conditions of
insurance policy and/or P&I cover. Adjustments, if any of revenue nature are made after
statement of claims are received from the Average Adjusters.

(c) Claims made by the Corporation against other parties including ship repair yards, ship-owners,
ship charterers, customs and others, etc. are accounted for on realisation, due to uncertainty in
the amounts of their ultimate recovery.

11. INVESTMENTS:-

(a) Long Term Investments are stated at cost. Provision for diminution is made to recognize a
decline, other than temporary, in the value of such investments.

(b) Current Investments are stated at lower of cost and fair value.

12. TAXES ON INCOME:-

In view of opting for Tonnage Tax scheme, provision for income tax liability is made as per special
provisions relating to income of shipping companies under Income Tax Act, 1961 from financial year
2004-05.

172
13. LEASES:-

In respect of assets acquired on lease prior to 1st April 2001, lease rentals are accounted on accrual
basis over the period of the lease and in respect of assets acquired on or after 1st April 2001, lease
rentals are accounted in accordance with AS-19 “Accounting for Leases”.

14. PROVISIONS:-

Provisions are recognised when the company has a present obligation as a result of past events, for
which it is probable that an outflow of resources embodying economic benefits will be required to
settle the obligation and a reliable estimate of the amount can be made.

A.2 CHANGES IN ACCOUNTING POLICY DURING THE YEAR ENDED 31ST MARCH 2006 TO
30TH JUNE 2010.

1. Consequent to change in AS-15 Employees Benefits, the Corporation adopted revised AS-15, and
revised the accounting policy from 1st April 2006, and provided the liability against all defined plan
including PRMS. In the financial year 2005-06 contribution to Gratuity Fund and provision for leave
encashment on retirement are made on the basis of actuarial valuation at the end of the year in the case
of shore staff, officers afloat and crew on Corporation roster.

2. During the year 2007-08 , in view of notification issued by Ministry of Corporate Affairs dated 7th
December, 2006 prescribing the Companies (Accounting Standards) Rules 2006, the corporation has,
with effect from 1st April, 2007, changed the accounting policy relating to recognition of foreign
exchange fluctuation on repayment and conversion of liabilities pertaining to long term loans for fixed
assets acquired from a country outside India, arising out of transactions entered into on or after 1st
April, 2004, consequently such foreign exchange fluctuation (loss/gain) has been charged / credited to
the Profit and Loss Account, except to the extent they are regarded as an adjustment to the interest cost
during the period of construction, which till previous year was adjusted to carrying value of respective
assets.

During the year 2008-09, the Corporation has exercised the option available vide Notification No. GSR
225(E) dated 31st March 2009 issued by the Ministry of Corporate Affairs under section 211 (3C) of
the Companies Act, 1956 relating to Accounting Standard 11 “The Effect of Changes in Foreign
Exchange Rates” and accordingly the exchange difference arising on repayment of liabilities and
conversion of year-end foreign currency balances in respect of such long term loans relating to
acquisition of depreciable capital assets arising out of transactions entered on or after 1st April 2004
has been adjusted to the cost of the respective asset/ assets under construction which was hitherto
recognised in the Profit & Loss Account except to the extent that they were regarded as an adjustment
to the interest cost during the period of construction.

3. During the year 2007-08,in accordance with Accounting Standard 26 “Intangible Assets”, the
corporation has changed the accounting policy for amortisation of computer software over the useful
life not exceeding five years, which till previous year was being charged on Written Down Value
Method at the rates applicable to computer hardware prescribed in ‘Schedule XIV’ to the Companies
Act 1956.

4. During the year 2007-08, the Corporation has modified the accounting policy in respect of additions
made to existing vessels, which have completed its originally estimated useful life. In case of additions
involving structural changes, on or after 1st April 2007, resulting in extension of useful life based on
technical evaluation, the depreciation on such additions is provided over the extended remaining useful
life (not less than rates prescribed in schedule XIV), which was earlier fully charged to depreciation in
the year of addition.

5. From the year 2008-09 onwards, Dry-dock repair expenditure are recognised in the Profit & Loss
account to the extent work is done, based on technical evaluation, which were previously charged to the
expenses in the year on completion of entire Dry-dock.

6. In 2005-06 and 2006-07, the Corporation had the policy of deferment of expenses as follows:

173
(a) Compensation payable under Voluntary Retirement Scheme had been deferred to be written
off in five equal instalments commencing from the year in which it was incurred.

(b) Based on the certification by the Technical Department, major revenue expenses like
extensive steel renewals, structural alterations, replacement of major equipments etc.
involving an expenditure above Rs. 5 million, on each vessel, including on those which had
competed their normal life and where the benefit was expected to accrue over an extended
period, were treated as Deferred Revenue Expenditure up to 31st March 2003 to be written off
over a period of three to five years or the remaining useful life of the vessel depending upon
the nature of each case.

Such major expenses incurred after 31st March 2003 are charged to Profit & Loss Account. This policy
has been continued till the year 2006-2007.

174
ANNEXURE - VI

STATEMENT OF DIVIDEND

(Rs. in Millions)
Particulars June AS AT 31ST MARCH
30,2010 2010 2009 2008 2007 2006
Equity Share
Capital
Face value (Rs) 10 10 10 10 10 10
No of Shares 423,453,645 423,453,645 423,453,645 282,302,430 282,302,430 282,302,430

Rate of Dividend
Interim - - - 45% 85% 85%
Final - 50% 65% 40% 0*** 0***

Amount of
Dividend
Interim - - - 1,270 2,400 2,400
Final - 2,117 2,752 1,129 - -

Corporate
Dividend Tax
Interim - - - 216 337 337
Final - 352 468 192 - -

*** For the Year 2006 & 2007 Interim Dividend is declared as Final Dividend

175
ANNEXURE - VII

STATEMENT OF ACCOUNTING RATIOS

Particulars June AS AT 31ST MARCH


30,2010 2010 2009 2008 2007 2006
Earning Per Share (Rs.)* After Extra Ordinary Items
Basic 4.22 9.29 22.66 17.82 24.00 26.37
Diluted 4.22 9.29 22.66 17.82 24.00 26.37
Earning Per Share (Rs.)* Before Extra Ordinary Items
Basic 4.22 9.29 23.26 18.15 24.00 26.37
Diluted 4.22 9.29 23.26 18.15 24.00 26.37
Return On Net 2.73% 6.18% 15.42% 13.51% 19.88% 25.55%
Worth (%)
Net Asset Value per 154.54 150.33 146.90 131.88 120.70 103.18
Share (Rs.)*
Total No of Shares 423,453,645 423,453,645 423,453,645 423,453,645 423,453,645 423,453,645
outstanding at the
beginning of the
year *
Total No of Shares 423,453,645 423,453,645 423,453,645 423,453,645 423,453,645 423,453,645
outstanding at the
end of the year *
Weighted Average
number of Equity
Shares used as
denominator *
Basic 423,453,645 423,453,645 423,453,645 423,453,645 423,453,645 423,453,645
Diluted 423,453,645 423,453,645 423,453,645 423,453,645 423,453,645 423,453,645

(i) The Corporation does not have any outstanding diluted potential equity shares. Consequently, the basic
and diluted earnings per share of the Corporation remain the same.

(ii) The shareholders of the Corporation in their Annual General Meeting held on 29th September 2008
approved issue of bonus shares in the ratio 1:2. During the year 2008-09 the Corporation has issued
141,151,215 fully paid up equity shares of Rs. 10/- each as bonus shares amounting to Rs.
1,411,512,150/- Accordingly the basic earnings per share is calculated including the bonus shares. The
basic earnings per share for previous financial years have been restated after taking into account the
bonus shares.

* The above information has been adjusted for all periods, based on new number of shares after issue of bonus
shares in the ratio of 1 : 2

Notes :

a) Earnings Per Share (Rs.) = Net profit after tax / Weighted average number of equity shares as at year
end.

b) Return on Net worth (%) = Net profit after tax / Net Worth ( excluding revaluation reserve + Capital
Grant received against Fixed Assets)

c) Net asset Value (Rs.) = Net worth (excluding revaluation reserve + Capital Grant received against
Fixed Assets) / Number of equity shares outstanding at the end of the year

176
ANNEXURE - VIII

STATEMENT OF CAPITALIZATION
(In Rs. Millions)

Pre Issue as
Post
Particulars at June 30,
Issue*
2010

Debt 29,158 [•]

Shareholders Fund
a) Equity Share Capital 4,235 [•]
b) Reserves & Surplus 61,207 [•]
Total Shareholders Funds 65,442 [•]
Less: miscellaneous Exp. To the extent not written –off - [•]
Net Worth 65,442 [•]
Long Term Debt/ Equity 0.45 [•]
*
The post-issue figures can be ascertained only on the conclusion of the Book Building process

177
ANNEXURE – IX (A)

STATEMENT OF SECURED LOANS


(Rs. In Millions)
Particulars June 30, 2010 AS AT 31ST MARCH
2010 2009 2008 2007 2006
SECURED LOANS
State Bank of India 107 160 267 373 480 587
Industrial Development Bank of India - - - - - 27
Bank of Baroda - - - - - 400
Oriental Bank of Commerce 894 1,005 1,452 1,899 2,346 2,793
Bank of Maharashtra 800 800 1,200 1,200 1,200 1,200
United Bank of India 1,210 1,210 - - - -
FCNR Loan from State Bank of India 4,336 4,428 1,975 514 561 -
Foreign Banks (in Foreign Currency) 21,811 19,366 198,23 10,556 7,860 8,737
Total 29,158 26,969 24,717 14,542 12,447 13,744

ANNEXURE – IX (B)

STATEMENT OF REPAYMENT OF LOAN

Lender Facility Amount Repayment schedule


Date Amount outstanding as
(in Rs. on 30/06/2010
Million) Amount
(in Rs.
Million)
Indian Institutions
State Bank of India 16-Oct-99 1,280.00 107 24 half yearly installments of Rs. 53.3
millions
Bank of 3-Oct-00 1,200.00 800 3 bullet installments of Rs. 400 million each
Maharashtra in the 9th, 10th and 11th year
Oriental Bank of 12-Jun-02 2,000.00 341 16 half yearly equal installments of Rs.
Commerce 112.35 million
Oriental Bank of 13-Jan-04 1,820.00 553 18 half yearly equal installments of Rs.
Commerce - II 111.12 million
United Bank of 16-Jan-10 6,600.00 1,210 14 half yearly equal installments of Rs. 86.43
India million from January 2011
SUB- TOTAL (A) 3,011
External Commercial
Borrowings Amount Amount
(In USD (in Rs.
million) Million)
Bank of Nova 1-Dec-00 85.82 498 16 half yearly equal installments of USD
Scotia Asia 5.34 million
Limited
Royal Bank of 9-Feb-01 28.61 607 20 half yearly equal installments of USD
Scotland 1.20 million with a bullet installment of USD
5.81 million at the end
KEXIM- ANZ 8-Jul-04 104.32 2,278 34 quarterly installments of USD 1.34
Investment Bank million increasing after every 3 years
KfW-Citigroup- 30-Mar-06 103.28 4,095 20 half yearly equal installments of USD
Nordea 5.16 million
State Bank of India 19-Apr-06 103.28 4,336 20 half yearly equal installments of USD
5.16 million
BNP Paribas 27-Mar-07 92.33 3,661 20 half yearly equal installments of USD
4.62 million
BNP Paribas 28-Nov-07 339.71 4,957 half yearly equal installments of USD 16.99
million

178
Lender Facility Amount Repayment schedule
Date Amount outstanding as
(In USD (In Rs.
million) million)
KfW 19-Dec-07 72.32 3,289 20 half yearly equal installments of USD
3.62 million
Bank of Nova 24-Dec-08 35.71 1,145 17 half yearly equal installments of USD
Scotia Asia 2.22 million from February 3, 2011
Limited
BNP PARIBAS 30-Mar-09 35.71 416 20 half yearly installments of USD1.79
million starting after delivery of the vessel.
State Bank of 30-Mar-10 259.56 865 Half yearly Installments of USD 13 million
India, Singapore for 19 installments & last installment - USD
12.56 million, starting from May 2010
SUB- TOTAL (B) 26,147
TOTAL (A+B) 29,158

ANNEXURE – IX (C)
STATEMENT OF UNSECURED LOANS
(Rs. In Millions)
Particulars June 30,2010 AS AT 31ST MARCH
2010 2009 2008 2007 2006

NIL

179
ANNEXURE - X (A)

STATEMENT OF REVENUE FROM OPERATIONS


(Rs. In Millions)
Particulars Nature Period / Year ended
(Recurring/ June March 31, March 31, March March March
Non recurring) 30,2010 2010 2009 31, 2008 31, 2007 31, 2006

Freight (Net) Recurring 5,660 20,746 24,024 22,754 25,280 23,760


Charter Hire Recurring 3,104 12,179 15,971 12,795 10,473 10,384
Demurrage Recurring 185 1,022 951 1,414 978 1,590
Receipts towards
Managed Vessels
- Remuneration Recurring 68 337 292 134 164 147
- Reimbursement Recurring 112 382 397 293 281 256
of overheads

TOTAL 9,129 34,666 41,635 37,390 37,176 36,137

180
ANNEXURE - X (B)

STATEMENT OF REVENUE FROM OTHER INCOMES

(Rs. in Million)
Particulars Nature Period / Year ended
(Recurring/ Non June March March March March March
recurring) 30,2010 31, 31, 31, 31, 31,
2010 2009 2008 2007 2006
Profit On Sales of Ships Recurring 155 1,225 345 - 827 121
(Net)
Interest Income - Recurring 338 1,890 2,266 1,925 1,826 1,235
Bank/Deposit
Interest Income -Deposit Recurring 47 99 216 164 150 74
with Public Financial
Institutions
Interest Income- others Recurring 41 193 245 188 221 417
Sundry Receipts
- Core Shipping activities Recurring 28 178 118 137 83 188
- Incidental activities Recurring 15 106 59 50 50 37
Profit On Sale of Fixed Recurring - - 2 35 1 3
Assets other than ships
Dividend on trade Recurring - 23 21 19 93 20
Investments
Currency exchange Recurring 135 - 564 (168) - -
difference
Profit on sales of Bunker Recurring 1 20 5 - - -

181
ANNEXURE - X (C)

STATEMENT OF O&M EXPENDITURE


(Rs. in Millions)
Particulars Period / Year ended
June March March March March March
30,2010 31, 31, 31, 31, 31,
2010 2009 2008 2007 2006
OPERATING EXPENSES
DIRECT OPERATING EXPENSES
Agency fees 38 173 155 145 151 134
Brokerage 20 81 91 93 88 94
Commission 128 486 572 625 571 616
Stevedoring, Dunnage, Cargo expenses etc. & 477 2,440 2,680 2,580 1,958 1,509
Slot Expenses on joint sector container services
(Net)
Marine, Light and Canal Dues 693 3,051 2,532 2,445 2,466 2,342
Fuel Oil (Net) 1,986 7,359 7,554 6,740 5,788 4,693
Water charges 5 34 34 28 23 31

Sub-Total ( I ) 3,347 13,624 13,618 12,656 11,045 9,419

HIRE OF CHARTERED STEAMERS (II) 1,000 3,760 4,739 4,831 5,575 4,497

INDIRECT OPERATING EXPENSES


Wages, Bonus and other expenses on Floating 852 3,505 3,669 2,448 2,377 2,476
Staff
Gratuity 45 61 (114) (64) (119) 76
Contribution to Provident Fund 4 30 30 49 47 53
Victualling, Transfer and Repatriation and other 35 180 309 457 431 435
benefits etc.
Stores & Spares 462 2,014 2,195 2,074 1,101 761
Sundry Steamer Expenses 60 211 82 133 125 102
Repairs and Maintenance, Survey expenses etc. 277 2,765 2,717 2,638 4,233 2,831
Insurance and Protection, Indemnity Club Fees & 193 912 858 723 669 676
Insurance Franshise etc.
Currency Exchange Difference - 584 - (6) 117 60

Sub-Total ( III ) 1,928 10,262 9,746 8,452 8,981 7,470


Total Operating Expenses ( I+II+III) 6,275 27,646 28,103 25,939 25,601 21,386

ADMINISTRATION EXPENSES
Salaries and Bonus 282 962 1,031 820 484 459
Gratuity 18 16 (76) (36) (28) 14
Contribution to Provident Fund 22 61 69 68 49 58
Staff Welfare Expenses 37 166 227 160 160 131
Remuneration to Directors 2 8 9 6 6 8
Directors' Sitting Fees 1 3 2 - - -
Directors' Travel Expenses 3 10 16 11 10 8
Donations & Grants - - 5 40 - -
Establishment Charges 103 462 497 493 437 403
Repairs and Maintenance-Buildings 18 100 67 65 57 3
Rent 11 55 55 52 47 50
Lease Rent to Shore Employees 20 114 120 122 97 98
Rates and Taxes 1 20 15 12 16 13
Insurance 1 2 2 1 3 5
Auditors' Remuneration 1 8 7 7 5 6
Bank charges 9 2 4 3 9 6

182
Particulars Period / Year ended
June March March March March March
30,2010 31, 31, 31, 31, 31,
2010 2009 2008 2007 2006
Others 2 - - - - -
TOTAL 531 1,989 2,050 1,824 1,352 1,262

OTHER EXPENSES, PROVISIONS ETC.


Provision for Off Hire Etc. 13 73 73 (12) 119 49
Provision for Doubtful Debts and Advances - 43 388 120 21 31
Foreign Taxation 10 37 65 38 40 29
Miscellaneous Expenses 6 3 12 8 (29) 1
Debts / Advances written off - 1 - 177 1 -
Provision for contingencies etc. - 4 - 4 68 -
Total Other Expenses, Provisions Etc. 29 161 538 335 220 110

INTEREST
On Term Loans 123 521 646 607 792 791
Others - 4 1 2 9 -
Total Interest 123 525 647 609 801 791

DEPRECIATION 1,016 3,814 3,252 3,028 2,916 3,036

183
ANNEXURE - XI

STATEMENT OF TAX SHELTER

A. With effect from Financial Year 2004-05 the Corporation has opted for assessment of its income under
‘Tonnage Scheme’, under Chapter XII-G and there is no timing and permanent differences under these
provisions as there exists no tax shelter. The salient features of the Scheme are as follows:

• A new Chapter XII-G is inserted in the Act containing Sections 115V to 115VZC which provides for
special provisions relating to taxation of the income of shipping companies popularly known as tonnage
tax scheme for taxation of shipping profits. Provisions are introduced with effect from 1st April, 2005
and, are applicable accordingly, in relation to assessment year 2005 – 2006 and subsequent years. It has
following features:-
• It is a scheme of presumptive taxation whereby the notional income arising from the operation of a ship is
determined based on the tonnage of the ship which is then taxed at the normal corporate rate applicable
for the year.
• Section 115VG gives the manner of computation of the daily tonnage income which when multiplied by
the number of days the ship operated, will give the annual tonnage income from the ship. A company
owning at least one ship may charter in ships subject to certain limits for the purpose of operation.
Relevant shipping income, which replaces the actual income from the operations, is defined in section
115 V-I Section 115VJ gives the treatment of common costs.
• Notional Income (i.e. Tonnage income) is offered for taxation and Relevant Shipping Income (i.e. income
from core activities and incidental shipping income to the extent of one-fourth per cent of the turnover
from core activities) is not subject to tax. This results in significant savings and there are no timing
differences.
• The profits from the business of operating qualifying ships will not be taken into consideration for the
purpose of MAT as per section 115VO.
• In terms of section 115VT, a tonnage tax company has to create a reserve of at least 20% of its book
profits to be utilized for the purpose of acquisition of new ships.
• As per section 115VU a tonnage tax company has to comply with a minimum training requirement in
accordance with the guidelines issued by the DG (Shipping).
• The company will be expelled if the training requirements are not met for 5 consecutive years. Section
115VV lays down the limit of 49 percent for chartering in of vessels. In terms of section 115VW,
maintenance of separate books of account and the audit of the same is compulsory for a company opting
for the scheme. Section 115VX lays down the details regarding valid certificate which indicates the net
tonnage of ships. Sections 115VY and 115VZ provide for the contingencies of amalgamation and de-
merger. Section 115VZB enjoins upon a company not to abuse the preferential tax regime and section
115VZC provides for expulsion of a company in case of abuse.
B. By virtue of Section 10(34) of the IT Act, income earned by way of dividend income from another
domestic company referred to in Section 115-0 of the IT Act, are exempt from tax in the hands of the
company, subject to provisions of section 14A and rules framed there under.
C. By virtue of section 10(35) income earned by way of dividend from units of mutual funds specified under
clause 10 (23D) is exempt from tax, subject to the provisions of Section 14A and Rules framed there
under.

184
ANNEXURE - XII

STATEMENT OF LOANS & ADVANCES

(Rs. In Millions)
Particulars June 30, AS AT 31ST MARCH
2010 2010 2009 2008 2007 2006
LOANS AND ADVANCES
(Considered good unless otherwise stated)
(A) Secured :
Loans and Advances to Employees and Employees’ Co-
operative Societies
- Considered Good 130 135 152 178 202 235
* * * * * *
- Considered Doubtful
130 135 152 178 202 235
* * * * * *
Less : Provision for doubtful Loans & Advances
130 135 152 178 202 235

(B) Unsecured :
Advances recoverable in cash or in kind or for value to
be received :
- Considered Good 2,852 2,382 2,464 2,167 2,478 3,075
- Considered Doubtful 337 339 342 94 107 107
3,189 2,721 2,806 2,261 2,585 3,182
Less : Provision for doubtful Advances 337 339 342 94 107 107
2,852 2,382 2,464 2,167 2,478 3,075

Excess of fair value of plan assets over actuarial gratuity 445 506 578 378 274 -
liability
Loans and Advances to employees and employees' Co-
operative Societies under Staff Welfare Scheme**

Other Loans 3 3 4 5 5 5
Advance Indian Income Tax & Tax Deducted at Source 8 - 64 - 1,217
(Net of Provisions)
Balances with Customs, Port Trust etc.
(a) Considered good 127 138 95 139 245 191
(b) Considered doubtful 10 10 77 76 - -
137 148 173 216 245 191

Less : Provision for doubtful balances with Customs, 10 10 77 76 - -


Port Trust etc.
127 138 95 139 245 191

Deposits 30 26 21 18 57 55
TOTAL 3,587 3,199 3,314 2,949 3,261 4,778
*
0.2 million
**
0.04 0.04 0.04 0.1 0.1 0.04

185
ANNEXURE NO: XIII

STATEMENT OF SUNDRY DEBTORS

(Rs. in Millions)
Particulars June 30,2010 AS AT 31ST MARCH
2010 2009 2008 2007 2006
Debts outstanding exceeding Six Months
Considered Good 737 826 1,639 1,524 1,575 1,668
Unsecured considered Doubtful 538 538 547 368 588 644
1,275 1,364 2,186 1,892 2,163 2,312
Less: Provision for Bad & Doubtful Debts 538 538 547 368 588 644
737 826 1,639 1,524 1,575 1,668
Others
Considered Good 3,640 2,611 2,732 2,459 1,877 2,185

TOTAL 4,377 3,437 4,371 3,983 3,452 3,853

186
ANNEXURE - XIV

STATEMENT OF INVESTMENTS

(Rs. In Millions)
Particulars June AS AT 31ST MARCH
30,2010 2010 2009 2008 2007 2006
QUOTED:
Trade Investment :
In Shares -Fully Paid Up
Equity Shares of Rs. 20/-
each of Scindia Steam
Navigation Company Ltd.,
Fully paid (Rs. 0.03 millions)
No. of Shares held 3,438 3,438 3,438 3,438 3,438 3,438
Less: Provision for
Diminution in the Value of
Investments*
Market Value : As at June
30, 2010 Rs. 0.05 millions
As at 31st March 2010 Rs.
0.03 millions
As at 31st March 2009 Rs.
0.03 millions
As at 31st March 2008 Rs.
0.03 millions
As at 31st March 2007 Rs.
0.02 millions
As at 31st March 2006 Rs.
0.01 millions

UNQUOTED
Joint Venture
In Shares -Fully Paid Up

Registered shares of Rials 4 4 4 4 4 4


5,000 each of Irano Hind
Shipping Co. Ltd, Tehran
No. of Shares held 24,500,000 24,500,000 24,500,000 24,500,000 24,500,000 980,000

Ordinary shares of Euro 2.33


each of India LNG Transport
Company (No.1) Ltd.(Rs.
0.30 millions)
No. of Shares held 2,908 2,908 2,908 2,908 2,908 2,908

Ordinary shares of Euro 2.33


each of India LNG Transport
Company (No.2) Ltd. (Rs.
0.30 millions)
No. of Shares held 2,908 2,908 2,908 2,908 2,908 2,908

Ordinary shares of Euro 2.33


each of India LNG Transport
Company (No.3) Ltd. (Rs.
0.1 millions)
No. of Shares held 2,600 2,600 2,600 2,600 2,600 2,600
*
Equity shares of Rs.10 each 610 610 610 5 -

187
Particulars June AS AT 31ST MARCH
30,2010 2010 2009 2008 2007 2006
of SCI Forbes Ltd.
*
(0.03 million)
No. of Shares held 61,000,000 61,000,000 61,000,000 500,000 25,000 -

Ordinary shares of Rs.10 500 500 500 310 160 -


each of Sethusamudram
Corp. Ltd.
No. of Shares held 50,000,000 50,000,000 50,000,000 31,000,000 16,000,000 -
Share Application money- - - - 95 75 85
Sethu Samundaram
Corporation Ltd

In Shares -Partly Paid up

Ordinary shares of Rs.10 67 57 - - - -


each Rs.3.5 paid up of SCI
Forbes Ltd (Previous year Rs.
3 paid up)
No. of Shares held 19,000,000 19,000,000

Redeemable Preference
Shares

Preference shares of Rs.10 618 495 - - - -


each .paid up of SCI Forbes
Ltd.
No. of Shares held 61,800,000 49,500,000

Gift Received from Irano -


Hind Shipping Co. Ltd.

Shares of 1 USD each fully - - - - - -


paid of ISI Maritime Ltd.
No. of Shares held 295,029 295,029 295,029 295,029 295,029 295,029

Shares of 1 USD each fully - - - - - -


paid of BIIS Maritime
No. of Shares held 16 16 16 16 16 16

Shares of 1 USD each fully - - - - - -


paid of Jaladhi Shipping
Services Pvt.Ltd.
No. of Shares held 500 500 500 500 500 500
*
0.01 0.01 0.02

Note: The Corporation entered into a joint venture agreement with Steel Authority of India Ltd. With participation interest in
the ratio of 50:50 and promoted a jointly controlled entity SAIL SCI Shipping Pvt. Ltd. The said company was incorporated
on 19.05.2010 with an authorised share capital of Rs. 1,700 million. The corporation has subscribed equity capital of
500,000 shares of Rs. 10 each amounting to Rs. 5 million. Pending remittances towards the subscribed capital, the same has
not been considered as investment and the corresponding liability has not been booked.

188
ANNEXURE - XV

STATEMENT OF CONSOLIDATED CHANGES IN SHARE CAPITAL

(Rs. In Millions)
Particulars June AS AT 31ST MARCH
30,2010 2010 2009 2008 2007 2006
Share capital *
Authorised Share Capital
No of Equity Shares of Rs.10 each ( in 450.00 450.00 450.00 450.00 450.00 450.00
Million)
Amount 4,500.00 4,500.00 4,500.00 4,500.00 4,500.00 4,500.00
Issued
No of Equity Shares( in Million) at the 423.45 423.45 282.30 282.30 282.30 282.30
beginning of the Year
Amount 4,234.50 4,234.50 2,823.00 2,823.00 2,823.00 2,823.00
Subscribed and Paid up
No of Equity Shares( in Million) at the 423.45 423.45 282.30 282.30 282.30 282.30
beginning of the Year
Add: Bonus Issue ( In Million) - - 141.15 - - -
Add: Fresh Issue of Equity Shares (in - - - - - -
Million)
No of Equity Shares( in Million) at the 423.45 423.45 423.45 282.30 282.30 282.30
end of the Year
Amount 4,234.50 4,234.50 4,234.50 2,823.00 2,823.00 2,823.00

Note :
The shareholders of the company in their Annual General Meeting held on 29th September 2008 approved issue
of bonus shares in the ratio 1:2. During the year 2008-09 the Corporation has issued 141151215 fully paid up
equity shares of Rs. 10/- each as bonus shares amounting to Rs. 1,411,512,150/-.

189
ANNEXURE NO: XVI

STATEMENT OF RELATED PARTIES

(Rs. in Millions)
Particulars Period / Year ended on
June March March March March March
30,2010 31, 31, 31, 31, 31,
2010 2009 2008 2007 2006
1) Key Management Personnel
1 Remuneration 2 9 10 7 7 8
2 Loans received during the year*
3 Loan amount due as at year end** 1 1 1

2) Joint Venture Companies


1 Investment made during the year 133 552 605 5 0 0
2 Dividend received - 23 21 19 93 20
3 Interest charged 39 166 178 180 205 336
4 Expenses Charged 3 8 2 1 1 9
5 Loans/ advances given/adjusted 341 675 451 69 923 513
6 Loans/ advances realised/adjusted 238 905 518 486 - 368
7 Receivables 2,368 2,347 2,634 2,659 3,139 2,189
8 Charter Hire payments 109 168 - - 50 20
9 Management and Accounting fees 14 57 16 - - -
10 Manning Agent fees 1 2 - - - -
11 Fees for supervision of construction of vessels - 14 - - - -
* 0.15 0.1 0.1 0.1 0.02 0.02
** 0.26 0.4 0.03

190
Particula Period / year ended
rs June 30, 2010 March 31, 2010 March 31, 2009 March 31, 2008 March 31, 2007 March 31, 2006
(I) Key Mr. S.Hajara Mr. S.Hajara Mr. S.Hajara Mr. S.Hajara Mr. S.Hajara Mr. S.Hajara
Manage (Chairman & (Chairman & (Chairman & (Chairman & (Chairman & (Chairman &
ment Maaging Director Maaging Director Maaging Director Maaging Maaging Maaging Director
Personne w.e.f 01/09/2005) w.e.f 01/09/2005) w.e.f 01/09/2005) Director w.e.f Director w.e.f w.e.f 01/09/2005)
l 01/09/2005) 01/09/2005)
Mr.B.K Mr.B.K Mr.B.K Mandal Mr.B.K Mandal Mr.B.K Mr.B.K
Mandal(Director(F Mandal(Director(F (Director(Financ (Director Mandal(Director Mandal(Director(F
inance) wef inance) wef e) wef Finance) wef (Finance) wef inance) wef
11/11/2005) 11/11/2005) 11/11/2005) 11/11/2005) 11/11/2005) 11/11/2005)
MR. Kailash MR. Kailash MR. Kailash MR. Kailash MR. Kailash MR.P.K.
Gupta(Director Gupta(Director Gupta(Director Gupta(Director Gupta(Director Srivastava
(P&A)) w.e.f. (P&A)) w.e.f. (P&A)) w.e.f. (P&A)) w.e.f. (P&A)) w.e.f. (Chairman &
20/07/2006 20/07/2006 20/07/2006 20/07/2006 20/07/2006 Managing
Director) wef
15/02/1996
Mr.U.C Grover Mr.U.C Grover Mr.U.C Grover Mr.U.C Grover Mr.U.C Grover Mr. Capt. T.D.
Director (T&OS) Director (T&OS) Director (T&OS) Director (T&OS) Director Hazari(T&
(wef 01/04/2006) (wef 01/04/2006) (wef 01/04/2006) (wef 01/04/2006) (T&OS) (wef OS((wef
01/04/2006) 01/07/2001)
Mr. J.N. Das Mr.J.N.Das Mr.J.N.Das Mr.J.N.Das Mr.R.K. Mr.R.K. Mitra(B&
Director (L&PS) Director (L&PS) Director (L&PS) Director (L&PS) Mitra(B& T)wef01/04/2004
(wef 24/12/2007) (wef 24/12/2007) (wef 24/12/2007) (wef 24/12/2007) T)wef01/04/200
4
Mr. K.S.Nair Mr. K.S.Nair Mr. K.S.Nair Mr.S.S. Mr.S.S. Mr.S.S. Rangnekar
Director (B&T) Director (B&T) Director (B&T) Rangnekar Rangnekar Director (L&PS)
(w.e.f 03/11/2008) (w.e.f 03/11/2008) (w.e.f Director (L&PS) Director (L&PS) (wef 14/03/1997)
03/11/2008) (wef 14/03/1997) (wef
14/03/1997)

(II) Joint SCI Forbes Ltd. SCI Forbes Ltd. SCI Forbes Ltd. SCI Forbes Ltd. SCI Forbes Ltd.
Ventures Irano Hind Irano Hind Irano Hind Irano Hind Irano Hind Irano Hind
Shipping Co.Ltd. Shipping Co.Ltd. Shipping Co.Ltd. Shipping Co.Ltd. Shipping Shipping Co.Ltd.
Co.Ltd.
India LNG India LNG India LNG India LNG India LNG India LNG
Transport Co. (No. Transport Co. (No. Transport Co. Transport Co. Transport Co. Transport Co. (No.
1) Ltd. 1) Ltd. (No. 1) Ltd. (No. 1) Ltd. (No. 1) Ltd. 1) Ltd.
India LNG India LNG India LNG India LNG India LNG India LNG
Transport Co. (No. Transport Co. (No. Transport Co. Transport Co. Transport Co. Transport Co. (No.
2) Ltd. 2) Ltd. (No. 2) Ltd. (No. 2) Ltd. (No. 2) Ltd. 2) Ltd.
India LNG India LNG India LNG India LNG India LNG India LNG
Transport Co. (No. Transport Co. (No. Transport Co. Transport Co. Transport Co. Transport Co. (No.
3) Ltd. 3) Ltd. (No. 3) Ltd. (No. 3) Ltd. (No. 3) Ltd. 3) S.A.
SAIL SCI
Shipping Pvt. Ltd.

191
ANNEXURE - XVII

STATEMENT OF SEGMENT REPORTING

(Rs. In Millions)
Sr. Particulars For the For the For the For the For the For the
quarter year ending year ending year ending year ending year ending
ending 31/03/2010 31/03/2009 31/03/2008 31/03/2007 31/03/2006
30/06/2010
1 Segment Revenue
i) Liner 2,768 8,339 8,250 8,446 7,308 6,707
Segment
ii) Bulk 6,270 26,739 32,679 28,407 31,032 28,692
Segment
iii) Others 486 1,777 1,900 1,168 1,377 1,331
iv) 1 25 22 20 95 20
Unallocated
Revenue
Total 9,525 36,880 42,851 38,041 39,812 36,750
2 Segment Results
Profit/(Loss)
before tax &
interest
i) Liner 323 (2,236) (1,735) (1,108) (70) 1,038
Segment
ii) Bulk 1,078 4,999 9,782 7,797 9,029 9,009
Segment
iii) Others 276 499 608 130 689 907
Total 1,677 3,262 8,655 6,819 9,648 10,954
Less : 3 (9) - 35 (75) (2)
Unallocated
Expenditure
(Net of
income)
Add : Interest 303 1656 2080 1661 1396 935
( Net )
Total Profit 1977 4927 10735 8445 11119 11891
before tax
3 Segment Assets
Liner 9,020 8,911 9,450 6,310 4,287 3,009
Segment
Bulk Segment 59,304 57,051 54,450 45,515 38,316 37,411
Others 6,078 5,464 3,617 2,434 2,027 2,260
Total 74,402 71,427 67,517 54,259 44,630 42,679
Unallocable 32,765 31,906 33,266 26,812 30,902 27,207
Corporate
Assets
Total 107,167 103,332 100,783 81,071 75,532 69,887
4 Segment Liabilities
Liner 1,449 1,455 1,233 1,505 1,334 1,549
Segment
Bulk Segment 5,717 5,509 6,610 5,284 5,816 6,425
Others 2,693 2,701 2,164 2,104 1,834 2,287
Total 9,859 9,665 10,007 8,893 8,984 10,261
Unallocable 31,866 30,011 28,570 16,335 15,436 15,932
Corporate
Liabilities
Total 41,725 39,676 38,577 25,228 24,420 26,193
5 Capital Expenditure during the year

192
Sr. Particulars For the For the For the For the For the For the
quarter year ending year ending year ending year ending year ending
ending 31/03/2010 31/03/2009 31/03/2008 31/03/2007 31/03/2006
30/06/2010
Liner 119 (497) 6,779 (21) 3 4
Segment
Bulk Segment 526 11,008 7,725 (316) 49 3,272
Others 10 81 100 229 9 8
Total 655 10,592 14,604 (108) 61 3,284
6 Depreciation
Liner 147 589 419 277 280 285
Segment
Bulk Segment 862 3,193 2,732 2,520 2,625 2,742
Others 7 32 101 231 11 9
Total 1,016 3,814 3,252 3,028 2,916 3,036

193
ANNEXURE - XVIII

STATEMENT OF CONTINGENT LIABILITES

(Rs. In Millions)
Particulars June AS AT 31ST MARCH
30,2010 2010 2009 2008 2007 2006
Contingent Liability not Provided
For:
1) Claim against the corporation
not acknowledged as debts-
a)Claim made by M/s. 384 379 357 333 311 182
Chokhani International Ltd.
Towards Dry Dock expenses
pending before High Court,
Chennai
b)Forfeiture of earnest money 891 944 833 611 487 446
deposit, cargo loss, freight
,demurrage ,slot payments, fuel
cost ,other operational claims
and custom duty disputed
demand (as certified by
management)
c) Disputed amount of Income 521 521 58 15 - -
Tax (as certified by the
management)
d)Claim By National Institute - - - 92 92 92
of Oceanography towards loss
of ship and other incidental
charges due to fire

2) Guarantees given by the


banks
a) on behalf of the corporation 205 269 282 234 240 215
b) on behalf of the Joint 332 323 425 332 363 413
Venture to the extent of
Corporation's Share.

3) Undertaking cum indemnity 100 100 100 100 100 100


given by the corporation

4) Cargo Claims covered by P&I 24 18 48 64 172 239


Club

5) Bonds/Undertakings given by 735 735 279 1,910 1,910 1,910


the corporation to the Custom
Authorities

6) Corporate Guarantees
/Undertakings -
- In respect of joint Ventures Not Not Not Not Not Not
Ascertainable Ascertainable Ascertainable Ascertainable Ascertainable Ascertainable
- Others 718 506 602 149 Not -
Ascertainable

7) Liability towards NYSA USA - - - - Not Not


Pension -Exit from Ascertainable Ascertainable
INDAMEX/ IDX Service

194
ANNEXURE - XIX

STATEMENT OF FIXED ASSETS

(Rs. In Millions)
Particulars June 30,2010 AS AT 31ST MARCH
2010 2009 2008 2007 2006
Gross Block 88,211 88,932 81,618 66,943 67,054 68,189
Less: Depreciation 43,427 43,786 43,248 40,351 37,324 35,590
Net Block (A) 44,784 45,146 38,370 26,592 29,730 32,599

CAPITAL WORK IN PROGRESS


a) Assets under Construction 23,228 18,547 20,999 20,072 7,625 2,373
b) Assets held for disposal* - -

Sub-Total(B) 23,228 18,547 20,999 20,072 7,625 2,373

Total(A+B) 68,012 63,693 59,369 46,664 37,355 34,972


*
0.2 0.2 0.2 0.2

195
ANNEXURE - XX

STATEMENT OF RESERVES & SURPLUS

(Rs. In Millions)
Particulars June AS AT 31ST MARCH
30,2010 2010 2009 2008 2007 2006

Capital Reserve 1,254 1,254 1,254 1,179 1,151 928


General Reseves 28,097 28,096 27,696 25,607 20,808 16,808
Share Premium Account - - - - - -
Special Reserve u/s 33 AC of I.T Act,1961 12,150 12,150 12,150 12,150 12,150 12,150
(utilised)
Tonnage Tax Reserve 2,800 2,800 2,000 6,950 5,250 3,000
Tonnage Tax Reserve (utilised) 9,950 9,950 9,950 3,000 3,000 3,000
Staff Welfare Fund 11 12 10 15 15 15
Corporate Social Responsibility Reserve 112 112 94 - - -
Allocated Social Responsibility Reserve 12 13 - - - -
Profit & Loss Account 6,821 5,034 4,817 4,119 5,915 4,970
61,207 59,421 57,971 53,020 48,289 40,871

196
ANNEXURE - XXI

STATEMENT OF CURRENT LIABILITIES & PROVISIONS

(Rs. In Millions)
Particulars June AS AT 31ST MARCH
30,2010 2010 2009 2008 2007 2006
A. CURRENT LIABILITIES
Sundry Creditors:
Small and Medium Enterprises 30 18 21 15 132 99
Others 6,999 7,008 7,786 6,316 7,196 7,372

Interest Accrued but not due 72 66 242 112 123 111


Advances and Deposit 1,080 1,067 675 1,053 518 1,886
Security and other Deposits 12 12 12 12 10 10
Interim Dividend Payable - - - - 2,400 -
Other Liabilities 818 747 894 917 671 731
Unpaid Dividend 6 6 4 6 3 5
Unfinished Voyages 118 377 158 259 272 327
Bank Overdraft
*
Bayerische Hypo-Und Vereins Bank AG (formerly - - - - -
Vereins Bank, Hamburg)
* *
City Bank Israel-USD Freight - - - -

Total 9,135 9,301 9,792 8,687 11,325 10,542

B. PROVISIONS
Foreign Taxation (Net of Advance) 91 83 54 17 31 20
Indian Income Tax - - 3 70 125 1,655
Wealth Tax - - - - - 1
Leave Encashment 567 571 542 393 340 95
Post retirement Medical Scheme 305 283 249 198 152 136
Proposed Dividend 2,117 2,117 2,752 1,129 - -
Tax on Proposed Dividend 352 352 468 192 - -

Total 3,432 3,406 4,068 1,999 648 1,907


*
0.01 million

197
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with
our restated consolidated financial statements as of and in the years ended March 31, 2006, 2007, 2008, 2009
and 2010, prepared in accordance with the Companies Act, India GAAP and the SEBI ICDR Regulations,
including the schedules, annexures and notes thereto and the reports thereon, included in the section “Financial
Statements” beginning on page 156. Unless otherwise stated, the financial information used in this section is
derived from the restated consolidated financial statements of the Company.

Indian GAAP differs in certain material respects from U.S. GAAP and IFRS. We have not attempted to quantify
the impact of IFRS or U.S. GAAP on the financial data included in this Draft Red Herring Prospectus, nor do
we provide a reconciliation of our financial statements to those of U.S. GAAP or IFRS. Accordingly, the degree
to which the Indian GAAP financial statements included in this Draft Red Herring Prospectus will provide
meaningful information is entirely dependent on the reader's level of familiarity with Indian accounting
practices. For further details, see the section “Summary of Significant Differences between Indian GAAP, U.S.
GAAP and IFRS”.

This discussion contains forward-looking statements and reflects our current views with respect to future events
and financial performance. Actual results may differ materially from those anticipated in these forward-looking
statements as a result of certain factors such as those set forth in the sections “Forward-Looking Statements”
and “Risk Factors”, respectively.

For purposes of discussion and analysis of the audited financial statements for the three-months ended June 30,
2010, financial items for this period have not been analyzed against unaudited financial information for the
three-months ended June 30, 2009. This comparison is not presented because applicable regulations do not
permit the Company to include unaudited financial information for the three-months ended June 30, 2009 in the
Draft Red Herring Prospectus for comparison purposes, as the Company's auditors have not audited the
Company's June 30, 2009 financial statements. This discussion and analysis of the audited financial statements
for the three-months ended June 30, 2010 should not be read as an estimate or projection of full Fiscal Year
2011 results of operations. See the section entitled “Forward-Looking Statements”.

Overview

Our Company was incorporated as ‘Eastern Shipping Corporation Limited’ on March 24, 1950 under the
Companies Act, 1913 in Mumbai. With effect from October 2, 1961, Western Shipping Corporation Limited
was amalgamated with our Company under the Shipping Corporations Amalgamation Order, 1961, issued by
the Government. The name of our Company was changed from Eastern Shipping Corporation Limited to The
Shipping Corporation of India Limited on October 21, 1961. We are one of India’s largest shipping companies
in terms of Indian flagged tonnage, with approximately a 35% share of Indian flagged tonnage as of June 30,
2010, according to the website of Directorate General of Shipping, Government of India (D.G. Shipping). As of
September 30, 2010, we owned a fleet of 74 vessels of 5.11 million dead weight tonnage (DWT). As of
September 30, 2010, we had ordered the construction of 29 vessels, which we expect to be delivered between
the year ended 2010 and 2013, and we have plans to order an additional 20 vessels in Fiscal Year 2011. In
addition, as of September 30, 2010, we managed 64 vessels of 0.2 million DWT on behalf of Government
agencies, public sector undertakings, and our joint ventures.

Our fleet includes dry bulk carriers, very large crude carrier (VLCC) tankers, crude oil tankers, product tankers,
container vessels, passenger-cum-cargo vessels, phosphoric acid and chemical carriers, LPG and ammonia
carriers, and offshore supply vessels. As of September 30, 2010, our fleet included 18 dry bulk carriers of
781,777 DWT, four VLCCs of 1,274,175 DWT, 17 crude oil tankers of 1,966,317 DWT, 13 product tankers of
730,990 DWT, ten offshore supply vessels of 17,904 DWT, five container vessels of 202,413 DWT, three
phosphoric acid and chemical carriers of 99,174 DWT, two gas carriers of 35,202 DWT, and two passenger-
cum-cargo vessels of 5,303 DWT.

Our customers are primarily comprised of Government agencies, large industrial concerns, international oil
companies and public sector undertakings. We have also entered into six strategic joint ventures which we

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believe provide us with various advantages and access to markets we would have otherwise not enjoyed. For
example, we have entered into three joint ventures with Japanese companies to own and operate LNG tanker
vessels.

Our operating income was Rs. 37,390 million, Rs. 41,635 million, Rs. 34,666 million and Rs. 9,129 for Fiscal
Years 2008, 2009, 2010 and the three-month period ended June 30, 2010, respectively. Our adjusted profit was
Rs. 7,546 million, Rs. 9,595 million, Rs. 3,934 million and Rs. 1,787 million for Fiscal Years 2008, 2009, 2010
and the three-month period ended June 30, 2010, respectively. Our income is principally generated from our
bulk carrier and tanker division which contributed 70.5%, 71.7%, 68.5% and 63% of our total income for Fiscal
Years 2008, 2009, 2010 and the three-month period ended June 30, 2010, respectively, and our liner division
which contributed 20.9%, 18.1%, 21.3% and 27.8% of our total income for Fiscal Years 2008, 2009, 2010 and
the three-month period ended June 30, 2010, respectively.

Our business is directly impacted by levels of economic activity in general, and international shipping volumes,
particularly in the energy-related shipping sector. In the twelve months ended December 31, 2009, demand for
shipping services as well as the prices charged by international shipping companies dropped significantly, as the
world economy came under pressure and shipping markets underwent a correction, including the Indian
shipping market. Compared to Fiscal Year 2009, our total income and net profit for Fiscal Year 2010 dropped
by 14.3% and 59%, respectively. According to the International Monetary Fund, since general economic
conditions have improved, the world trade volume is expected to grow at 9% and 6.3% in 2010 and 2011,
respectively. Nevertheless, demand and pricing levels for our services have generally remained well below the
highs reported in previous years.

Our worldwide operations are supported by offices in the four metros of India, namely Mumbai, Delhi, Chennai
and Kolkata and we also have an office in London. As of September 30, 2010, we were further supported by a
network of more than 70 agents worldwide that assist us in our marketing and logistics efforts.

Factors Affecting Our Business, Results of Operations and Financial Condition

Our business, results of operations and financial condition are affected by a number of factors, some of which
are beyond our control. This section sets out certain key factors that we believe have affected our business,
results of operations and financial condition in the past or we expect will affect our business, results of
operations or financial condition in the future. For a detailed discussion of certain factors that may adversely
affect our business, results of operations and financial condition, see the risk factors in “Risk Factors” on page x.

Demand for energy products

Our bulk carrier and tanker division is the primary revenue source of our Company, accounting for 70.5%,
71.7%, 68.5% and 63% of our total income for Fiscal Years 2008, 2009 2010 and the three-month period ending
June 30, 2010, respectively. The demand for our bulk carriers and tankers, to a large extent, depends on the
demand for energy related products, including crude oil, gas and coal. Due to imbalance in supply and demand
of tonnage and its consequential effect on the freight market, our total income and adjusted profits for Fiscal
Year 2010 dropped by 14.3% and 59%, respectively, compared to Fiscal Year 2009. We expect that our results
of operations will continue to be dependent upon demand for shipping of energy related products in the future.

Our fleet size and fleet mix

Our operating results are dependent upon the size and mix of our fleet of vessels. Our ability to win new
business depends upon our having vessels that are available for employment by our customers. In addition, the
configuration of our fleet needs to be optimized to take advantage of the type of customer opportunities that are
available to us. We believe that we must increase the size of our fleet to meet demands in various markets and to
take advantage of growth opportunities. See the section titled “Our Business-Fleet on Order” for a summary of
the 29 vessels of total 1,722,680 DWT we have ordered for delivery between Fiscal Year 2010 and 2013. We
also expect to lower the average age of our fleet by adding new vessels, subject to timely delivery of our ordered
ships.

Fluctuations in charter rates

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Our total income and operating margins are affected by the charter rates that we charge for our shipping
services, which are largely dependent on supply and demand. Charter rates have declined during the global
economic slowdown in Fiscal Years 2009 and 2010 due to the reduced demand for shipping services. During
that same period, our total income and profits for Fiscal Year 2010 dropped by 14.3% and 59%, respectively.

Our operational and fixed expenses

Our profitability is significantly impacted by our operational expenses. For Fiscal Years 2008, 2009, 2010 and
the three-month period ended June 30, 2010, our operational expenses were Rs. 25,939 million, Rs. 28,103
million, Rs. 27,646 million and Rs. 6,275 million, respectively, or 64.3%, 61.7%, 70.8%, and 63.1%,
respectively, of our total income. Some of our expenses, such as those for rent on our properties and interest on
our indebtedness, are fixed or subject to limited adjustment by us, and will not fluctuate in proportion to changes
in operating revenues. The fixed expenses allow us to control our expenditure. However, if our income from
operations decreases due to our inability to employ our vessels at profitable rates or low productivity, we are
still required to pay such fixed expenses which will reduce our profitability and operating margin. In addition,
any increase in expenses related to bunker (of fuel), maintenance, repairs, spare parts, salaries, consumables and
compliance with new rules and regulations will also have a material adverse impact on the results of our
operations, if we cannot pass such increased costs to our customers.

Our Accounting Policies

Our financial statements have been prepared under the historical cost convention method, in accordance with
Indian Generally Accepted Accounting Principles (GAAP), the applicable accounting standards notified under
the Companies (Accounting Standard) Rules, 2006, prescribed by the Central Government under the provisions
of the Companies Act.

The preparation of financial statements in accordance with Indian GAAP and the provisions of the Companies
Act 1956, require our management to make judgments, estimates and assumptions that affect the reported
amounts of our assets and liabilities, disclosures of contingent liabilities and the reported amounts of income and
expenses. These judgments, assumptions and estimates are reflected in our accounting policies.

Certain of our accounting policies are particularly important to the presentation of our financial position and
results of operations. While we believe that all aspects of our financial statements should be studied and
understood in assessing our current and expected financial condition and results of operations, we believe that
the following critical accounting policies warrant particular attention.

Recognition of Income and Expenditure

Our income statement reflects:

(a) The earnings and direct operating expenses (voyage related variable costs) in respect of all finished
voyages on accrual basis;

(b) Standing charges (vessel related fixed costs) for all the vessels for the entire period of operation
during the year of accrual basis;

(c) Income and expenditure in respect of ad-hoc slot operations, the customs penalty claims and
container detention charges which are accounted for on realization;

(d) In respect of slot sharing agreement with other shipping lines, the earnings and expenses on an
accrual basis based on completed voyage cycles during the year;

(e) In respect of time charter arrangements, incomes and expenses are booked on accrual basis; and

(f) Demurrage income is recognized on estimated basis, based on past experience of settlements.

The criteria followed for the purpose of determining finished voyages are the following:

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(a) Passenger cum cargo vessels: disembarkation of passengers and discharge of cargo by all daughter
vessels should be completed on or before the last date of the financial year;

(b) Cargo vessels (other than those serviced by feeder or daughter vessels): discharge of cargo should
be completed on or before the last date of the financial year;

(c) Cargo vessels serviced by daughter vessels: the ultimate discharge of cargo by all daughter vessels
should be completed on or before the last date of the financial year; and

(d) Cargo vessels serviced by feeder vessels: the discharge of cargo at the transhipment port by the
mainline and own feeder vessels should be completed on or before the last date of financial
year. Transhipment port is the point of commencement and completion of both the services. The
completion of the mainline and feeder voyage is determined independently of each other.

(e) Cellular liner service: On completion of round voyage.

Unfinished Voyages

Any voyage which does not fulfill the above mentioned criteria, is treated as an unfinished voyage. Collections
made on account of freight and other charges in respect of such voyages are carried forward as unfinished
voyage earnings. Direct operating expenses booked for such voyages, including hire and freight for vessels
chartered-in, are carried forward as unfinished voyage expenses except in case of a time charter.

Allocation of Container Expenses

Expenses relating to container activities such as stevedoring, stuffing and destuffing, and transportation are
identified with the relevant voyage and classified as direct operating expenses. Expenses such as container hire,
kobi charges, ground rent and handling of empty containers, which are not directly identifiable with any
particular voyage, are allocated to all voyages on the basis of unit days for each voyage. The sum so allocated to
unfinished voyages is carried forward as unfinished voyage expenses.

Fixed Assets and Depreciation

(a) Fixed assets are stated at cost of acquisition less accumulated depreciation. Cost includes borrowing
cost, duties and other expenses relating to acquisition of assets.

(b) Depreciation on vessels is charged on the ‘straight line method’ at the rates prescribed in Schedule
XIV to The Companies Act, 1956, except in cases of offshore vessels, which are written off over a
period of 12 years and second hand vessels, which are written off over their respective useful lives
(not less than rates prescribed in Schedule XIV) as determined by technical evaluation. On
additions made to the existing vessels (including adjustments resulting on account of exchange rate
fluctuation), depreciation is provided for the full year irrespective of the date of addition and
balance over the remaining useful life of the vessels.

(c) Additions made to the vessels which have completed their useful life are fully depreciated in the
year of addition. However, in respect of additions made involving structural changes, on or after
April 1st, 2007, resulting in extension of useful life based on the technical evaluation, the
depreciation is provided over the extended remaining useful life (not less than rates prescribed in
schedule XIV).

(d) On assets other than vessels, depreciation is charged on the ‘written down value method’ as per the
rates prescribed in Schedule XIV to the Companies Act, 1956, for the full year irrespective of the
dates of additions and no depreciation is being charged on assets sold or discarded during the year.

(e) Computer software is amortized over the useful life not exceeding five years.

(f) Assets costing individually Rs. 5,000 and below are fully depreciated in the year of addition.

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(g) The carrying amounts of assets are reviewed at each balance sheet date for impairment so as to
determine the provision for impairment loss, if any, required, or the reversal, if any, required of
impairment loss recognized in previous periods.

Capitalization of Expenses

Interest and other expenses, incurred up to the date of first loading on amounts borrowed for acquisition or
improvement of assets, are charged to the cost of respective acquired or improved assets. In addition, operating
costs, including initial stores and spares of newly acquired vessels until the port of first loading, are added to the
cost of the respective vessel.

Retirement and Disposal of Vessels

(a) Vessels which have been retired from operations for eventual disposal are withdrawn from the fixed
assets and exhibited separately at book value in the balance sheet under “Vessels Retired From
Operation”.

(b) Anticipated loss, if any, in the disposal of such vessels is recognized immediately and provision for
the same is made in the accounts for the year in which these vessels have been retired. For the
purpose of determining the loss, the sale price is recognized if the contract for sale is concluded. In
other cases, assessment of the realizable value is made on the basis of the prevailing market
conditions. Losses on such vessels are provided for after taking into account the expenses such as
customs duty, sales tax or value added tax, in connection with the disposal, as well as estimated
expenses in maintaining the vessel up to its sale. Wherever the exact amount under each item of
expenses is not known, an assessment is done on the best estimate basis.

(c) Profits on sale of vessels are accounted for only upon completion of sale thereof.

Major Repairs and Renewals of Vessels

(a) Advances given towards repairs or renewals of capital or income are adjusted only on completion
of the entire work and completion is duly certified by the relevant authority.

(b) Drydock repair expenditure is recognized in the profit and loss account to the extent work is done
based on technical evaluation.

Valuation of Stocks

(a) Inventories are valued at lower of cost and net realizable value unless otherwise stated.

(b) Fuel oil purchases are initially booked as stock. The value of year-end stock is arrived at after
charging consumption of ‘first-in-first-out’ method.

(c) With regards to provisions purchased for victualling on board vessels, where catering is under a
departmental catering system, all purchases are treated as consumed.

(d) The Company maintains godowns for keeping certain limited items of stores pending issue to the
vessels. Stock of stores lying in the godowns at the year end are valued at lower of cost or net
realizable value.

(e) Stores or spares including paints, and the like are charged to income as consumed when delivered to
vessels. Items of stores or spares, which are not delivered to vessels, are shown under stores or
spares-in-transit and are treated as stock. Such stocks are valued at the lower of cost and net
realizable value. However, at the end of the financial year, provision for consumption is made for
items which remain as stores or spares-in-transit for more than three months.

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Accounting of Foreign Currency Transactions

(a) All transactions during the year are booked at the rate of the last Friday of the preceding month
published in the Financial Times, London.

(b) Liner freight is booked at rate as mentioned above, relevant to the months in which the dates of
sailing fall.

(c) The year-end foreign currency balances other than in US Dollars appearing in the books of account
are converted into US Dollars at the rate of the last Friday of March published in the Financial
Times, London and thereafter, the monetary assets and monetary liabilities as well as the long term
loans are converted into Rupees at the SBI mean rate prevailing at the end of the financial year.

(d) Exchange difference arising on repayment of liabilities and conversion of year-end foreign currency
balances pertaining to long term loans for acquiring vessels, ownership of containers or other assets
and asset under construction is adjusted in the carrying cost of vessels, ownership containers or
other assets and assets under construction.

(e) The exchange difference arising on income and other accounts except as stated under point (d)
immediately above is adjusted in the profit and loss accounts.

Employee Benefits

(a) Liabilities towards provident fund are accounted for on accrual basis.

(b) For defined benefit plans, in the case of share staff, officer afloat and crew on the Company’s
roster, the cost of providing benefits is determined using the projected unit credit method, with
actuarial valuations being carried out at each balance sheet date. Actuarial gains and losses are
recognized in full in the profit and loss account for the period in which they occur. The retirement
benefit obligation recognized in the balance sheet represents the present value of defined benefit
obligations as reduced by the fair value of the plan assets. Any asset resulting from this calculation
is limited to the present value of available refunds and reductions in the future contribution to the
plan.

(c) In the case of crew on the general roster, gratuity, which is insignificant in value, is accounted on
cash basis.

Insurance, Protection & Indemnity (P&I) and Other Claims

(a) Provision in respect of claims against our Company and covered by insurance and P&I risks is
made as under:

(i) In respect of claims falling under Hull & Machinery Insurance, which are estimated to be
above the deductible limit, to the extent of the deductible limit.

(ii) In the case of cargo claims, on the basis of the actual claims registered and/or paid pertaining
to the relevant year’s voyages as ascertained at the year-end as reduced by the amount
recoverable from insurers.

(b) All types of claims settled and paid above the deductible limits are shown as recoverable from hull
underwriters or P&I clubs until these are finally accepted by them as per the conditions of the
insurance policy and/or P&I cover. Adjustments, if any, of income are made after the statement of
claims are received from the average adjusters.

(c) Claims made by our Company against other parties including vessel repair yards, vessel-owners,
vessel charterers, customs and other third parties are accounted on realization, due to uncertainty in
the amounts of their ultimate recovery.

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Investments

(a) Long term investments are stated at cost. The provision for diminution is made to recognize a
decline, other than temporary decline, in the value of such investments.

(b) Current investments are stated at lower of cost and fair value.

Taxes on Income

In view of opting for Tonnage Tax Scheme, provision for income tax liability is made as per special provisions
relating to income of shipping companies under Income Tax Act, 1961 from financial year 2004 - 2005. For
details of Tonnage Tax Scheme, see “Statement of Tax Shelters” in “Financial Statements” beginning on page
156.

Leases

In respect of assets acquired on lease prior to April 1, 2001, lease rentals are accounted on an accrual basis over
the period of the lease and in respect of assets acquired on or after April 1, 2001, lease rentals are accounted for
in accordance with AS-19 “Accounting for Leases”.

Provisions

Provisions are recognized when the Company has a present obligation as a result of past events, for which it is
probable that an outflow of resources embodying economic benefits will be required to settle the obligation and
a reliable estimate of the amount can be made.

Selected Description of Income and Expenses

The following is a description of the primary components of our income statement.

Income

Our total income is comprised of income from operations, profit on sale of vessels, interest income and other
income. Our total income for Fiscal Years 2008, 2009, 2010 and the three-month period ended June 30, 2010
were Rs. 40,318 million, Rs. 45,578 million, Rs. 39,062 million and Rs. 9,951 million, respectively.

Income from operations

Our income from operations is comprised of freight, charter hire, demurrage and receipts from managed vessels.
Our income from operations were 92.7%, 91.3%, 88.7%, and 91.7% of our total income for Fiscal Years 2008,
2009, 2010 and the three-month period ended June 30, 2010 income, respectively.

Freight